Marriage is a combining of two lives into one working towards a common goal. While it may not be the most romantic thing to think about, married couples need to remember that their individual credit histories affect their partner's financial standing. When buying a car, you need to know whether or not your spouse's credit score will be checked and how it will affect your ability to get approved for a car loan.
Will Both Scores be Checked?
The only time an applicant's spouse would have their credit checked for a car financing loan is if they are named on the application. Lenders need permission to run a detailed check of someone's credit, and that permission comes in the form of a signed loan application. This makes the decision of who to name on the application an important one.
There are a few options for married couples who are trying to finance a car purchase. They can apply for the car loan together, only one spouse can apply, or either of those options can be used with the assistance of a third-party cosigner. Which of these options you and your spouse choose is dependent on your specific financial situation.
Who Should Apply?
If one spouse has bad credit, the logical answer to this question is to have the spouse with better credit named on a car loan application. This logic becomes flawed, however, if the person with bad credit is also the primary income earner for the household. In that instance, combining the income level of one spouse and the improved credit of another could result in an approved application.
Benefits of Joint Application
Allowing a credit score-challenged spouse onto a joint car loan application may result in a higher interest rate, but there are very real benefits to choosing this plan. Timely payments made toward the loan will gradually improve both spouses' credit ratings. Once the combined credit rating of both spouses has reached a sufficient level, the car loan can be refinanced for a lower interest rate.
Drawbacks of Joint Application
Aside from potentially higher interest rates that can raise monthly payments outside of an affordable budget range, there is another drawback to joint car loan applications that you need to consider. Simply put, some marriages end. Divorce can impact car loan terms and make things more difficult.
A spouse's credit will be checked if their name is included on a joint car loan application. Keep this in mind while deciding how to finance the purchase of a car.
