When Good Credit Marries Bad Credit

Each person has their own credit report and score. A good
credit borrower can only help the spouse with bad credit—however the bad credit
can effect a good credit borrower if they sign on joint accounts. 

Ask questions of your spouse and keep separate credit if
needed because one spouse’s bad credit could bring down the qualification for a
home loan. Home loan programs use the lower of the scores to calculate rate and
payment. Since a home loan is typically a high dollar commitment, even a 1%
increase in rate can make a big difference in the monthly payment.

The lender should help weigh the pros and cons of using only
one income to qualify, or utilizing a no income verification loan (NIV) vs. dual
income qualification at a higher rate and payment. In some cases, an even better
option may be to wait before taking out a home loan. During that time, the
spouse with challenging credit can take some time to improve their credit rating
and potentially save money for a larger down payment –which makes it easier to
qualify.

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