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Building A Credit Identity Separate From Your Spouse

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Marriage is a partnership, and it works much better with each partner pulling his or her own weight. To avoid problems down the line, it's a good idea for each partner to establish and maintain a separate credit identity. As a matter of fact, that is how the law will see it in all but the nine community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.) This means that if your spouse takes on a financial responsibility without you, you will not be legally liable for it, and vice versa. But it also means that good financial behavior on the part of your spouse won't necessarily reflect on your credit report, even if you share in the actual payments. Here are a few tips to help you create and maintain your personal credit identity, apart from your spouse's.

  • Keep separate checking accounts. When people get married, they often choose to combine their checking accounts into one account both can access. This is certainly easier, logistically speaking, for maintaining a household. However, this exposes you to trouble if your spouse should turn out to have less than great habits with ATM withdrawals and checks. A better idea is to keep separate accounts, and also open a joint account for household use.
  • Don't take out joint credit card accounts or personal loans. This is another step many people take when they get married, but it's a bad idea for some of the same reasons separate checking accounts are a bad idea. Besides, remember that in a bankruptcy filing, credit card debt can be fully discharged, and with separate credit card accounts, one spouse can file for bankruptcy without involving the other. In states which recognize tenancy by the entirety or similar forms of marital ownership, a judgment obtained by a creditor against one spouse will not become a lien against jointly owned property. However, if the credit card is a joint one, a judgment will attach to the property, possibly enabling the creditor to sell your home by sheriff's execution sale! Talk to your bankruptcy attorney to determine how your spouse's assets will be affected during bankruptcy.
  • Understand how creditors are permitted to consider your spouse's credit. When applying for credit in the non-community property states, a lender is not allowed to make a determination based on your marital status. Thus, he cannot ask to see your spouse's information, unless her income will be  a basis for repayment of the debt.
  • Make sure joint accounts with good records are reported on both credit reports. If you've been building good credit together on joint accounts like your mortgage or car loan, you want to make sure that the information is being reported under both names. If you find out it isn't, you can write to the creditor and request that they report to the credit bureaus about both of you.

With tightening credit markets, having a separate credit identity is crucial to maintaining your family's financial viability. If you or your spouse are overwhelmed with debt, talk to a bankruptcy attorney today to find out how a properly planned bankruptcy can help your marriage and your finances.

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