Dear Let's Talk Credit, My wife and I were married a little over a year ago. We both have individual credit cards with little to no balance on them that we had before we got married. We have been discussing whether to add each other to our individual credit cards, but we are unsure if it will improve our credit scores or hurt them. We both have reasonable credit scores, but I have a bankruptcy from four-and-a-half years ago still showing on my report. Our only debt currently is some student loans and a car loan that is in my name (purchased before we got married). Since we are hoping to buy a house soon, we are taking every step possible to ensure the best credit scores possible. Would putting the other person on our cards improve our scores? Thank you. -- Wayne
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Dear Wayne, Congratulations on your marriage! I'm glad that you and your new wife are planning ahead for what likely will be the largest purchase you make in your lifetime!
First, see where you stand. I suggest both of you pull your credit reports and credit scores from all three of the major credit bureaus -- Experian, Equifax and TransUnion. You can pull your credit reports for free from each of the credit bureaus once a year from AnnualCreditReport.com. Your credit scores will cost about $20 each from MyFico.com. That will let you know whose scores are higher, and whether there are errors on your credit reports. (If you do find an error, make sure you dispute the mistake properly.)
Because you have a bankruptcy on your credit report, it may give your credit score a boost if you are added as an authorized user on your wife's credit cards, assuming her credit score is higher than yours. You both have individual credit card accounts with low or no balances, which is important for your individual credit scores. But some additional positive history on your credit report from your wife's accounts may increase your score and help with your goal to get the best mortgage rates.
Even though your wife may have a higher credit score, you could add her to your accounts as an authorized user as well. Adding your wife as an authorized user on your accounts may not improve her score much or at all, but the positive accounts shouldn't lower it. A couple of additional points may make a difference, particularly if she is close to making the next bracket for a better interest rate based on her credit score.
It sounds as if you are doing the right things as far as your credit is concerned. You are making on-time and as-agreed payments while you are keeping your balances on your credit accounts low. What might be helpful for you is to go ahead and do some loan shopping to see what mortgage terms you would qualify for with your current income and credit history. The credit inquiries from the lenders you ask about a mortgage loan will count against your credit score as only a single inquiry, as long as all the inquiries occur within a 30-day period.
You would be wise to prequalify for a mortgage before you start shopping for homes. Two extremely important things are accomplished when you shop for the mortgage. First, you are much more likely to end up with a mortgage loan that you can comfortably afford, because you are less likely to force your budget to work for that dream house that's out of your price range. Second, if you are not happy with the interest rate or other terms for the mortgages that you qualify for now, you can postpone your home buying until your credit history improves or you can save for a more substantial down payment.
Should you decide to wait awhile before purchasing a home, your prior bankruptcy will have less and less of an impact on your credit score the more time that elapses from the date of discharge. Also you will be paying down your student loan balances, which will make you more attractive to mortgage lenders. Good luck with your house hunting!
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See related: How to buy a house if you have bad credit