Does marriage affect your credit score?

Read this before you tie the knot...

Which of the following conditions do you think impact your CIBIL score directly?

• You guarantee a home loan.
• You apply for a personal loan which gets rejected
• You pre-pay a home loan
• You get married

All the above events -- except for the last one, getting married -- impact the credit score directly. Getting married has no direct bearing on the credit score of either of the spouses. However it does impact the financial situation and may sometimes impact the credit score of any individual indirectly due to the action of the partner.

Why marriage has no impact on your CIBIL score?

When two people get married, their credit score is not merged or linked; so getting married will not make your credit score better or worse due to your partner’s score. Both the individuals keep their individual credit history so whatever existing or old debt you have continues to reflect in your name. Even if there is a name change in case of women (post marriage), the past treatment of debt is not erased or dropped, it is still carried forward under the new name.

So if you have defaulted in a loan repayment in the past, it will in no way whatsoever impact your spouse’s CIBIL score. Similarly if you have been a very responsible borrower and have an immaculate credit history your spouse cannot benefit from it simply by getting married.

There can be some indirect impact on the CIBIL score of both the partners if one of them behaves irresponsibly. If either of the spouses is sloppy in paying dues on time (if he or she is paying them for both), or tends to over indulge on credit card swiping which may cause the joint finances to be stretched then there could be a negative impact on the CIBIL score of both of them. While on the other hand a responsible borrower could teach a thing or two about financial discipline to his/her spouse helping him/her to have a better CIBIL rating.

Is CIBIL score of both partners considered when applying for a loan?

When a partner applies for any loan individually then only the CIBIL score of the person applying for a loan is considered to evaluate the loan eligibility. The score of the partner whether good or bad has no effect on the acceptance of the loan application.

However if husband and wife decide to apply for a loan jointly then obviously the CIBIL rating of both will be considered before accepting the application. Applying for a joint loan has certain inherent advantages like the couple is entitled to a bigger loan, both can get tax advantage and there is responsibility sharing for loan repayment. Both applicants need to have a healthy credit history for their application to be accepted.

In case one of the partners has a low CIBIL score and finds it difficult to get a loan application approved due to his/her score, the other partner can become the main applicant and pay a bigger EMI share. In such a scenario depending on the lender’s policy the CIBIL score of the partner who does not have a very healthy rating, his/her rating may not be considered. 

What women should remember when getting married

Women should keep a few things (related to credit rating) in mind when they are planning their wedding. This could come in handy in later years post marriage.

• If you are taking your husband’s name post marriage do inform all the concerned parties like credit card companies, CIBIL, banks, lenders about it. This will ensure that the necessary changes in name and address are made.  Your credit history will be carried forward in the new name.
• Do not surrender all your cards or close your bank accounts in your individual name and opt for only a joint account or an add on card instead. Maintaining individual credit score, a bank account and a credit card in your name could prove to be very useful some time in future. Due to some unfortunate event or in the eventuality of your partner not having a very healthy score your CIBIL rating could come in handy. Even if there is one transaction a month keep your credit card going and do not prepay you loans.
• If you do not have an individual credit trail, now is good time to start it. If you want to take a loan in your name at least a six month trail is required to establish your credit behaviour.

Just like in all aspects of life, marriage can provide great synergy in financial management too; both partners though maintaining individual scores can rely on the better score of their partner if required so.

Illustration: Dominic Xavier/Rediff.com

The author is a credit expert with 10 years of experience in personal finance and consumer banking industry and another 7 years in credit bureau sector. Rajiv was instrumental in setting up India's first credit bureau, Credit Information Bureau (India) Limited (CIBIL). He has also worked with Citibank, Canara Bank, HDFC Bank, IDBI Bank and Experian in various capacities.