Let’s get a couple things clear right off the bat: getting married won’t hurt your credit score, and tying the knot doesn’t mean taking on your spouse’s bad credit. That’s not to say that getting married doesn’t affect your finances.
Getting married is an exciting life event, but one of the less romantic sides of saying “I do” is talking about finances and credit with your partner. You both probably have different ways of managing money, so it’s important to sit down and talk openly about your financial situation and your goals for the future. If you’re a saver and they’re a spender, money is bound to become a point of contention. Having that uncomfortable “money saving talk” early can keep those pet peeves from becoming major issues.
Still, many people are unaware of the potential financial benefits and drawbacks of getting married. Here are a few things that can change after you walk down the aisle:
Getting married will affect how much you pay in taxes — for better or worse. When you get married, Canada Revenue Agency (CRA) uses your total household income to determine how much you owe in taxes. That could mean paying less in taxes if you qualify for certain credits and benefits. It could also mean owing more in taxes if your combined income pushes you into a higher tax bracket.
Doing some research before filing your taxes could save you money as newlyweds. You could be entitled to the spousal tax credit if your partner makes less than $12,000 a year, or the family tax cut if you or your partner has a child.
Joint bank accounts
Not everyone pools their money when they get married, but the option is available through your bank. With a joint chequing or savings account you co-own the account with your partner and you both have equal access to make withdrawals and deposits.
While a joint account can be a great way to pay for shared household expenses or save for a trip you’re going on together, it’s important to set clear expectations of what the account should and shouldn’t be used for to avoid money management issues.
Keep in mind that you can’t open a joint RRSP, but you can make spousal contributions to each other’s retirement accounts.
Mortgages and other large assets
Marriage and big purchases often go together. For most people, married life includes dreams of a house with a new car in the garage and all the furnishings. While two incomes can make it easier to afford big ticket items, it can also make it easier to overspend.
Try saving up for big-ticket items instead of using credit to make the purchase to avoid overextending your debt. However, this isn’t always possible for things like a mortgage or a vehicle. When you do make a significant purchase together it’s a good idea to talk about how each of you plan to tackle the payments. Good communication is key when managing large amounts of shared debt.
Tying the knot can actually lower your insurance rates since many insurance companies offer discounts for customers who buy multiple products. Combining your home and life insurance policies with your spouse can lead to lower premiums for the same amount of coverage.
By sharing home insurance you can get all of your personal property covered under one policy, including valuables purchased together like a TV or a computer. Getting a life insurance policy together as young newlyweds can save you money because premiums rise as you get older. While Manitoba Public Insurance (MPI) doesn’t offer a discount for multiple vehicles, you can save money on car insurance by registering your less-used car as a pleasure vehicle.
In some situations, your marital status can affect your ability to get approved for a loan in some situations. If both of you have excellent credit you’ll have no problem getting financing with a co-signed loan. Things get more complicated if you or your spouse has bad credit or a large amount of debt. Lenders may see this as a red flag and charge you a higher interest rate for borrowing, or you could get flat out denied.
Also, getting a loan with a spouse is like any kind of co-signed loan — when you sign the contract you’re both agreeing to pay back the debt if the other person can’t keep up with payments. Any joint loan means joint responsibility and liability.
Here are some frequently asked questions about marriage and credit:
Does credit combine when you get married?
- Does getting married increase your chances of getting a loan?
- Are you required to apply for a loan with your spouse?
- Does changing my maiden name affect my credit history?
- Do all my bank accounts join over to my spouse once we get married?
Does credit combine when you get married?
No, your credit information doesn’t combine with your spouse’s once you get married. Whatever your partner’s debt situation is before they joined you in holy matrimony remains on their credit report.
The only time your credit information co-mingles is when you have shared credit products — this is because your lender will report the repayment history to the credit bureaus under both of your names.
Does getting married increase your chances of getting a loan?
It depends. If you are both have a good credit score your combined income will make your application more attractive to a lender and you could get approved for a larger loan at a lower interest rate. On the other side of the spectrum, if either of you have credit issues getting approved can be more difficult and more expensive.
Are you required to apply for a loan with your spouse?
Nope. You both remain financially independent after marriage and in some situations it can be beneficial to apply for a loan as an individual. If one of you has bad credit the other partner will probably be able to get better loan terms and will have an easier time getting approved by doing it alone.
Does changing my maiden name affect my credit history?
No, changes to the personal information on your credit report, such as your last name, address and phone number, won’t have an affect on your credit history. All you need to do is update the information with your creditors and they will send an update to the credit bureaus.
Do all my bank accounts join over to my spouse’s once we get married?
No, your bank accounts don’t automatically join when you get hitched. You and your spouse can choose to open a joint bank account through your bank, but not every couple chooses to amalgamate finances after they get married. Talk to your partner and figure out if having all your money in one spot makes sense.
The best way to protect your credit moving forward, is through open communication with your partner and mindful spending choices. The loan specialists at Birchwood Credit Solutions can help determine what size of loan is best for you, in the interest of building better credit. Take a few minutes to fill out our online application form today.