Getting A Mortgage With A Partner Who Has Bad Credit
Nov 12, 2022 By Triston Martin

When you buy a property with a partner, you may utilize your joint income and assets to better qualify for a loan, increasing your total spending capacity. What if, though, your significant other has no credit or very little credit? Your ambitions of buying a house with your significant other might be dashed even if your credit is excellent if they have poor credit.

What Are Joint Mortgage Applications?

One of the most important considerations when purchasing a property is whether or not you will be able to obtain financing based on the lender's standards. This implies that if you're going in on a purchase with a friend, you'll need to do some introspective thinking.

When considering a combined mortgage application, banks consider the totality of each co-profile borrower rather than just the good points. To put it another way, the lending institution will consider both of your incomes together and check your credit.

Plus, here's the knockout punch: The lesser of the two credit scores is used by specific lenders as the basis for their loan choices and terms.

The Step-by-Step Guide to Raising Your Spouse's Credit Score

Remember that numerous things might damage your partner's credit score, some of which are beyond their control. A lower credit score or shorter credit history might be the consequence of several factors, including but not limited to crises, a lack of access to credit products, and discriminatory lending practices.

A "for better or for worse" approach to money and finding strategies to help your spouse improve their credit is necessary if you're serious about purchasing a property together. Listed below are a few potential approaches.

Rectify Mistakes on Your Credit Report

Verifying the validity of the negative credit score is the first step. Inaccuracies can appear on credit reports for various reasons, including creditors incorrectly reporting payments made on accounts.

As a first step, visit AnnualCreditReport.com to request your free credit report from each of the three major bureaus: Experian, Equifax, and TransUnion. If there are errors or something seems off on your credit report, you can have them fixed by following the procedures outlined by the agency that issued your statement.

Invest In Paying Down Current Debts

Consider using part of the money you've set up for a down payment toward paying down your credit card debt. This is because the ratio of utilized credit to total available credit plays a significant role in determining an individual's creditworthiness.

Your spousal unit utilizes just 20% of its credit line if they have a $5,000 limit and a $4,000 debt. A boost in credit score is feasible within a couple of months if a lump sum payment is made to reduce usage to below 30% and as near to zero as possible.

Integrate Your Spouse as an Authenticated User

Because payment history accounts for the most significant portion of a credit score, late or missed payments can devastate your partner's financial standing. Adding your significant other as an authorized user on one of your credit card accounts might help you get into a regular payment routine.

Partner: Open A Secured Credit Card

A secured credit card might assist your spouse in repairing their credit if they don't qualify for an unsecured card. To secure their credit line, which is often a few hundred dollars, they will use that money as collateral.

Your mate should then use the card sparingly and pay off the entire sum at the end of each month. Their credit rating should rise as they maintain regular payments.

Options Aside From Jointly Purchasing a Home

There are a few alternate routes to take if you and a standard lender can't come to terms with a property purchase.

Submit Only One Application

There's no harm in applying for a loan if you believe you can be approved with your current income level. Keep in mind that the majority of loan programs need a debt-to-income ratio of 43% or less, which means that your total monthly obligations cannot exceed 43% of your gross monthly income.

Wait, Then Try It Again

Building a better credit score takes time, and that time frame might look different for various people. It might take a few months, a year, or longer for your spouse to reach excellent credit territory, depending on how much progress they need to make.

If you need help figuring out what to do, a credit counselor is an excellent resource to look into. A lender may be able to help you out with a "quick rescore" if your credit score needs a slight bump to get you accepted.