A credit score reflects a consumer's creditworthiness by summarizing the financial information on his credit report. Each consumer has an individual credit score which may fluctuate based on changes in credit history. Getting new credit, co-signing a loan or closing a credit card may have a positive or negative affect on a credit score.
Credit Score Calculation
Credit score reflects three key areas of a consumer's credit report: accounts (loans, mortgages and credit cards), public records (bankruptcies or tax liens) and inquiries from creditors. Personal information, such as age, race, marital status or gender, does not go into a credit score calculation. A lender may request a consumer's credit score from one of the three credit bureaus (Experian, TransUnion or Equifax). A lender also may calculate a proprietary credit score based on the financial information received from a credit reporting agency.
Credit and Marriage
Spouses retain their own credit histories and credit scores after saying the nuptials. Individual accounts of one spouse will not have any affect on the other spouse's credit score or history. If a couple decides to take a loan together, a creditor will look at each person's individual score to determine eligibility. Credit scores also will determine the amount and the interest rate of the loan. The loan account history will appear on both credit reports. If one of the spouses acts irresponsibly about repaying the loan and it becomes delinquent, this may affect the credit scores of both spouses.
Credit Scores and Mortgage
When spouses apply for a mortgage, a lender may use the lower mid-score from the three credit bureaus. If one spouse's score is significantly lower, the loan officer will base approval and the interest rate upon that score. If qualified on his own, the spouse with a better score may exclude the other spouse when applying for loans.
Community Property States
Nine community property states--Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin--recognize that debt accumulated during a marriage belongs to both spouses and will be equally divided if the marriage ends. In this case, a spouse with a better credit score may have to repay credit obligations of the other spouse, which may have a negative effect on his score.
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