How to Get a Home Loan If Your Spouse Has Bad Credit

By Angela Monroe - July 25, 2019

The thing about marriage is that you share almost everything with your spouse, including your financial responsibilities and goals. If you are a financial rock star who’s married to someone with bad credit and you want to get a home loan to build your dream home, the difference in your credit scores may affect your application.

Marriage and Credit Score

Contrary to popular beliefs, your credit score does not automatically change when you get married. You and your spouse will continue to have separate credit profiles containing different credit histories and scores. Your credit profile will also not appear on your significant other’s credit reports and vice versa. 

If you or your spouse change your name after marriage, as in the case of most married women, your new name will reflect on your most recent credit profile. The name change will not affect your credit score whatsoever, like having your past credit history removed. This is because your credit report information tied to your social security number. You will continue to have just one credit report with accounts under your old and new names.

How Your Spouse’s Credit Score Affects Yours

Your spouse’s credit score will only have bearing on you if you have a joint account or jointly apply for a loan or credit card.

When you apply for a credit card or any types of loan, your capacity to repay will be assessed based on your income. One of the means to do this is by checking your bank account statements. With joint accounts and authorized user accounts, the history of only that account is reported on both spouses’ credit reports, even if only one spouse actually uses the account.

On joint accounts, both spouses are responsible for making credit card and loan payments. Furthermore, if the account becomes delinquent, the creditor or lender will attempt to collect from both spouses. With authorized user accounts, only the primary account holder is legally responsible for paying the credit card debt.

If you jointly apply for a loan, meanwhile, your application will be treated as one. Both of your credit scores will be checked and if one of you have bad credit, you might not be approved by the lender. If your application is approved, you might be charged with a higher interest rate than if the spouse with the higher credit score applied alone.

Home Loan When Your Spouse Had Bad Credit

If you’re married and you seek home financing but your partner has a poor credit rating, consider these five solutions:

1. Apply for a home loan on your own

Do you really want to buy a new house as soon as possible? You may want to apply for a home loan on your own instead of submitting a joint application with your partner. The lender will check your credit profile and capacity to repay the loan on your own. Only your income and assets will be factored in. This won’t be a problem if you have a stable source of income on your own and are not financially dependent on your spouse.

Since you get the home loan on your own, your spouse will not be responsible for the repayment. Make sure that you have the financial means to pay the mortgage on your own. While you and your spouse occupy the home you bought, it’s only your name on the dotted line of your loan contract.

2. Explain your case

Try to talk to your lender about your situation. If you can prove to them that your partner’s bad credit situation will not affect your financial capacity to repay the loan, they may be lenient enough to grant your joint application for a home loan. Apart from your lengthy and honest narrative for your spouse’s low credit score, also include an explanation of how you and your partner can reasonably make your monthly payments. Provide as many supporting documents as you can to support your claims.

Remember, however, that both of you and your spouse’ credit scores will be factored in when calculating your interest rate and loan terms. Even if your joint application is approved, your loan terms might be less favourable because of your partner’s bad credit rating.

3. Get another co-signer for the loan

Do you have a friend or colleague with a stellar credit rating, great income and a low debt-to-income ratio? Ask them to become a co-signer of your home loan. Their high creditworthiness will increase your chances of approval, as well as getting low interest rate and reasonable loan terms for the loan. 

Do note, however, that your co-signer will have equal responsibility for the loan. If you consistently make late payments or fail to settle your debt on its agreed term, their credit score will be negatively affected. They may also be required by your lender to settle the loan on your behalf.

4. Help your spouse improve his or her credit score first

Do you really want to apply for a home loan together with your spouse? You may need to postpone the application and help them get an improved credit score first. With your spouse’s improved credit score, you will have a higher chance of approval. You will also get a lower interest rate and better terms for your loan.

There are ways you can do to improve your spouse’s credit score. Check their credit reports for error or false information that negatively affect their score. Dispute any issues you find. Wait for the credit bureau to fix them and the corresponding increase in your spouse’s credit score before applying for a home loan together.

If the bad credit is a result of any outstanding debt or delinquent account, help your spouse settle their debt first or catch up on the payment of their late bills. If they have a loan default,  ensure that it is paid in full. 

Aside from paying off their existing debts, you may also need to help them handle their finances smartly. Encourage them to have clean credit and to limit their credit card use to 30% of its credit limit. Also, help them a good bank account conduct.

5. Get a bad credit home loan

A bad credit home loan is specially designed to help people with bad credit secure home financing. Typically, it requires a large down payment and collateral. The interest rate of the loan is also higher than the standard home financing.

There are lenders in Australia that specialise in bad credit home loans like Loans For People With Credit. These lenders examine your credit reports and take into considerations your reasons for having bad credit. Provide good and thorough explanations of your situation and how you intend to repay the loan. They will likely grant you the funds at a reasonable interest rate and loan terms. 


Get approved for a home loan despite a history of bad credit with us. Fill out our Bad Credit Loan Pre-Approval form or call 1300 769 384 to speak with one of our loan specialists. We will not conduct a credit check until we have spoken with you.


See also:


How To Get a Home Loan after Bankruptcy

8 Reasons Your Home Loan was Declined

Different Types of Bad Credit Home Loans

Angela Monroe
Angela Monroe is the Community Manager at The Positive Group, specialising in giving people the information that they need when they need it, and putting you on the path to a fair financial future. She has 8 years of experience in helping Australians find the right finance solutions, and regularly contributes articles to empower Australians with the knowledge they need to become financially healthy.


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