When you and your partner decide to move in together or get married, it’s an obvious sign of wanting to cooperate and be one rather than two individuals. Naturally, this need to bond and be a single entity extends to finance as well. Most couples think it is wise to not only merge their accounts, but also have joint credit. In fact, surprisingly, after getting married, a lot of people think that their accounts have been legally turned into one single joint account. However, while the thought process behind wanting to have joint finances and credit is appreciable, logic says otherwise.
Here are some crucial reasons couples should have separate credit:
- Joint Debt
In the unfortunate scenario of a couple breaking up and heading their own path, debt has to be shared equally by both partners contrary to what the popular belief is. If you think that after your divorce you can pay off certain debts and your partner can pay off the others, you are wrong. Legally speaking, couples are required by law to bear equal and 100% responsibility of any debts they owe, regardless of who owes the debt. In case you have joint accounts, this can be a real problem. Moreover, not only will this put a financial burden on you, but it will also spoil your credit score as higher debts entail a lower credit score and vice versa.
- Joint Credit Limits Both Partners
If the credit score of your spouse is not good whereas yours is praiseworthy, your ability to acquire a loan or any sort of credit will be severely hampered. When you have joint credit, one partner’s negative score also affects the other’s credit score. In other words, even if you go great lengths to ensure your credit score is positive, your efforts will go in vain if you have a careless partner.
- Losing A Partner Impacts Credit
Breaking up or having a divorce can turn out to be one of life’s most stressful and traumatic experiences. After separation, chances are that your income will be hampered as well. When income levels fall, credit scores suffer. A lower income can not only limit credit, but also eliminate it totally. Hence, experts suggest that individual accounts be maintained with credit kept separately.
- Problems Getting A Credit Card
The US Federal Reserve has advised commercial banks to provide credit cards to only those individuals who file incomes separately. With a joint account or joint credit, you won’t be able to get a credit card as household incomes are not considered sufficient. According to theory, if you do not wholly control the flow of money, there is no reason to provide you credit on the basis of simply having access to that income.
Watch Jason Kaplan from the Credit Pros explain why you shouldn’t combine your credit: