My Spouse Has Bad Credit - Can We Get a Mortgage Loan?

Reader Question: I have good credit but my spouse has bad credit. How will this affect us when applying for a mortgage loan? Any ideas or advice?

When you and your spouse apply for a mortgage jointly, the income, credit, and debt-to-income of both spouses will be used to determine your interest rate and the amount of loan. If your spouse has bad credit, you may not get qualified for the loan amount and interest rate needed to purchase the type of home you desire.

If your spouse's credit is so bad that it will affect your ability to secure a mortgage, you may have to apply for it alone. This means you will only be able to use your income on the application, which may mean you will qualify for a lesser amount. One option would be to ask a close relative to co-sign on the mortgage for you. This can be helpful, but it may also be tricky since that relative will be equally responsible for the payments being made on time. So any late payments or non-payment will be reported on their credit as well as yours.

If the above suggestions are not options in your situation, you may want to start by helping your spouse to repair his or her credit. An easy way to help increase their score would be to add him or her as an authorized signer on your credit cards. Payment information will be reported on your spouse's report as well, and as long as everything is paid on time this will only help to boost their score.

Your spouse should also work on paying down the debt if the high balances are affecting their score. This will also help to improve your spouse's score. If they have more negative credit than good credit but now have the ability to handle a credit card responsibly, you should look into applying for a secured credit card. In exchange for a deposit to an account held by the credit card company, they will issue you a credit card with a limit that matches the deposit. If all goes well, and you make timely payments, they will eventually rebate the deposit back to you and convert you to a traditional credit account.

Having a spouse with bad credit is not necessarily a deal-breaker as far as mortgage loans go. But it does require some extra consideration on your part. Hopefully this article gives you some things to consider. Good luck to you and your spouse in your home buying ventures!