Pre-marriage credit check can enhance wedded bliss

By Carolyn Bigda (www.chicagotribune.com)

This time of the year many couples are busy preparing for their upcoming nuptials. Cake? Check. Wedding dress? Check?

Credit Reports?

It's a worthwhile item to add to the to-do list.

Good credit can make all the difference in obtaining a low interest rate on a mortgage and other loans you will want to take out as husband and wife. And if there's credit trouble, the sooner you start repairing the damage, the better.

Here's what to do.

>Request your reports

As soon as possible request your individual credit reports from the three main credit reporting agencies: Equifax, Experian and TransUnion.

By law you are entitled to a free copy from each bureau every 12 months at www.annualcreditreport.com You'll have to pay $7.95 for a FICO score, the credit rating most lenders use, from Equifax. The other bureaus sell alternative scores.

If you plan to buy a home you also could make a trip to your bank or credit union for a mortgage prequalification. By doing so you'll learn how much house you can buy based on your credit and income, among other factors.

And should your credit need polishing, a loan officer can suggest tips.

"It's fairly common among younger couples that one spouse has good credit and the other has bad credit," said Marc Savitt, vice president of the National Association of Mortgage Brokers.To nab a lower interest rate the spouse with good credit could apply solo. But without two incomes on the application only a smaller loan likely would be approved.

Credit unions may be more lenient and concentrate on the better score in a joint application.

>Patching things up

Your FICO score improves the more distance you put between the present and any past credit mistakes. That's why it is important to identify problems before you apply for a loan.

"Credit can always be rehabilitated, but it can take some time," anywhere from nine months to two years, depending on the severity of the problem, said Evan Hendricks, author of Credit Scores & Credit Reports.

Some 65 percent of your credit score is based on your payment history and the amount of debt you owe. So paying your bills on time and paying down the balances will, over time, buoy your score.

The good news is that even after you are married you and your spouse keep separate credit reports. One's track record won't tarnish the other's.

One exception is if you take out a joint loan. In that case you are equally liable for the account. So pay late one month and the blunder shows up on both credit reports -- even if the payment was the other person's responsibility.

As a result Hendricks recommends focusing on improving your credit separately.

>Become authorized

There is one way to build credit jointly without having both spouses apply for a loan: naming an authorized user on a credit card.

An authorized user can make purchases with the card, and the account's record typically appears on that person's credit report. But the user is not responsible for the debt and would not have to pay any outstanding balances if, say, the original cardholder defaulted.

This arrangement is helpful if you have no credit history, because it's tough to borrow money, and therefore start building a record, without a file already in place.

But similar risks of a joint credit account apply. If one person fails to pay on time or runs up huge balances it could stain both credit reports.