Buying a house as a couple is a huge step. Along with deciding the location they prefer and what features are important in the home, there is another part of the homebuying process that actually deserves more attention—credit scores.
Of course, we know that your credit score plays a factor in the approval of your mortgage. But what if your spouse has poor credit and brings your chances of approval down? Here is how it can affect you and what you can do about it.
The three largest credit bureaus are Equifax, TransUnion and Experian. While these scores are not usually the same, they are usually similar. So, when choosing which to use, they take the middle of the three. For example, if you have a 720, 730 and 750, the highest and lowest will be dismissed which leaves the 730 to be used. If your spouse has a 520, 540 and 550, the lender will use the 540.
Since the second person’s credit score is too low to qualify for most mortgage programs, the couple must decide what steps to take. Typically, there would be a credit counseling and repair process that happens. If the couple is okay with waiting to purchase or needs both incomes to qualify, this is the best option. It results in better credit and qualifications for both potential homebuyers.
If the couple cannot or does not not want to wait, there is still a chance to be approved for a mortgage without the second/lower credit score. If the first person has a high enough income and credit score to get the amount they need alone, they can have their spouse added as a “non-purchasing spouse” which would remove their credit score from the application process but still allow them to have their name on the title to show […]