Dear To Her Credit,
If a married couple who uses joint accounts, thuspotentially affecting each other's credit, has only one person on the mortgage,could they separate their accounts to separate their credit? Then if they wentinto foreclosure, would that only affect the one spouse's credit? -- Cari

Dear Cari,
You don't need to do anything to separate your credit. Thereis no such thing as a joint credit history, and the joint or separate status ofone credit card or mortgage account does not affect the credit history of anyother account or cause information from other accounts to somehow merge. Everyaccount stands alone.

You could have a dozen joint credit cards with your husband,but if the mortgage is in your name only, the history of the mortgage account ison your credit history, not his.

A joint credit card account can affect another person's credit if the history of that accountis a problem. For example, if you had an account on which you had missed a fewpayments before you met your husband, and then you added him as a jointaccount holder, that account shows up on his credit history and dings hiscredit score.

Going into foreclosure is a cause for concern to both ofyou, however, even if your mortgage is only in one of your names. Consider:

  • If you live in a community property state and you stop making your payments, the bank may decide to collect from your husband. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin are community property states, and Alaska has opt-in community property laws. In those states, most assets and debts held by a couple are considered to belong to both of them. (There are exceptions, and the laws for community property states are not identical.)
  • Foreclosure is generally accompanied by financial chaos and stress. If you are having trouble making payments, it may be hard to keep up with other payments, including some that belong to him.
  • After foreclosure, the two of you need a place to live. Can you buy or rent a place based on his income and financial information alone? Will a landlord look askance at a foreclosure, regardless of whose name it was in? In this recession, foreclosure is losing some its stigma. Still, a landlord looking at two tenants may prefer the couple that didn't just default on a loan.

If it sounds like I'm trying to discourage going into foreclosure, I am. Almost any financial decision is better than foreclosure. I'mno fan of bankruptcy, but with a Chapter 7 or Chapter 13 bankruptcy -- which calls for a court-supervised repayment plan -- you mightat least save your home. Other options include finding a way to salvage yourfinancial situation and remain in your home, getting a loan modification, sellingyour home for whatever you can get for it (even if you have to bring a check toclosing) or doing a short sale (selling your house for less than the mortgagebalance, with an agreement from the bank that they will not collect thedifference.)

I'd also discourage couples from the idea of keeping all thedelinquent accounts in one spouse's name so they can preserve the otherspouse's record perfectly clean. If one spouse already has a much higher creditscore, it makes sense to do whatever you can to keep it that way. However,turning one spouse into the financial fall guy is a bad idea. It's not fair,and it feels too much like pitching one of you overboard. At some point, thespouse with the beaten up credit history is going to need a better creditscore. And if -- perish the thought -- something happens to the marriage, thatspouse can find himself or herself in a desperate situation.

Before you make any decisions with consequences as farreaching as letting your house go into foreclosure, please find a nonprofitagency affiliated with the National Foundation for CreditCounseling or the Association of Independent ConsumerCredit Counseling Agencies. They can help you find a better way tosolve your financial problems. Good luck!

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