April 29, 2015 by Leave a comment

When you promise to love your spouse for richer and for poorer, you usually don’t factor in the financial limbo that is having a bad credit score.

Mortgage lenders, however, will.

Many newlyweds make the mistake of assuming that one spouse with a good credit score will balance out one with a not-so-great score, but that’s actually the opposite of the truth. Most banks and lenders won’t average them, or even pay more attention to the higher one. If both borrowers don’t have the scores to qualify individually, prepare to get turned down.

That doesn’t mean that home ownership is completely out of your reach, though. Here are a few common courses of action for people in your situation.

Take time to improve your credit

A bad credit score isn’t something you can fix overnight. It’s going to take time, but it’s also something you’re going to want to fix later down the road, anyway—a higher credit score will get you lower interest rates.

So make sure you or your spouse starts paying bills on time and begins paying down debt on credit cards. Avoid opening new accounts, but also don’t close your existing ones right away, even if you’ve paid them off. Your score takes into account the amount of credit open to you.

Leave the partner with bad credit off the mortgage

Because lenders are evaluating you individually anyway, it is possible for the spouse with the best credit to get a mortgage on their own. Of course, this doesn’t work for everyone. If you need both incomes to qualify for a mortgage, then a lender may not consider you, even though you technically have the money.

You do always have the option of having a close relative, like a parent, signing as a co-borrower, but this can get messy, and it isn’t always recommended.

Compensate in other areas

When it comes to credit scores, there’s a difference between bad and completely unworkable. If yours is the former (over 580, typically, though this varies widely from lender to lender), then you may be able to qualify by being the perfect borrower in other ways. That means having a 20% down payment ready to go and paying off most if not all your debt prior to applying. Also, the lower your LTV ratio, or the loan amount divided by the appraised value of your home, the better your chance.

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