How Does My Partner's Credit Rating Affect My Ability To Get Credit?

Managing finances in a romantic partnership can be confusing when partners have different credit ratings.

A credit rating is an assessment of an individual’s likely ability to repay credit. This evaluation is based on an individual's history of borrowing money and repaying debts. A person's income and current debt levels also comes into play when deciding the credit rating or score he or she receives. 

Generally speaking each person has their own credit rating which is not affected by any other person's credit rating regardless of whether you happen to be related to them, married to them, living with them etc. We frequently see cases where one partner's credit rating is excellent when the others is not. However, if you have joint debt with a person the payment history on that joint debt will affect you both. For instance, if your partner is supposed to make the car payment and doesn't, it would appear on both credit histories when the debt is joint.

The major exception to the above relates to mortgages. Usually both parties who occupy and own a residence have the ownership in both names which means the mortgage debt is also in both names. This can be a problem if you are buying a new home or renewing a mortgage and one partner has a poor credit rating.

What can you do it that is the case?
If you are buying a new home consider putting the home (and the mortgage debt) into just the name of the person with the good credit rating. Alternatively, a couple could consider getting a co-signer for the person with the good credit rating if their income is not sufficient to cover the mortgage payment.

If you are renewing the mortgage consider getting help from a mortgage broker. A co-signer might also be helpful in this situation.

The best alternative is, of course, to fix the credit rating of the partner with the poor rating before you go to buy the house / renew the mortgage. This can be done by having that person get and use a secured credit card, ensuring that all payments are made on time or depending on the level of debt a partner is carrying,, having that person file a consumer proposal or bankruptcy to get a clean start and repair their credit.

Another thing worth considering is that while your partner’s bad credit rating may not affect your individual credit score, if that person continues to struggle with debt repayment, both of you may suffer if you maintain a joint account. If there is significant concern in this area, one option is to maintain separate bank accounts until both partners are on a more equal playing field credit wise.  

If one partner in a relationship has a poor credit rating and more debt than feels manageable, we encourage them to meet with one of our Licensed Trustee’s for a free confidential consultation to discuss their situation and strategically review all of their options.