There are two types of credit accounts: individual and joint. You can permit
authorized persons to use the account with either. When you apply for credit --
whether a charge card or a mortgage loan -- you'll be asked to select one type.
Individual Or Joint Account
Individual Account: The creditor considers your income, assets, and credit
history. Whether you are married or single, you alone are responsible for paying
off the debt. The account will appear on your credit report, and may appear
on the credit report of any "authorized" user. However, if you live in a community
property state (e.g. Arizona, California, Idaho, Louisiana, Nevada, New Mexico,
Texas, Washington, or Wisconsin), you and your spouse may be responsible for
debts incurred during the marriage, and the individual debts of one spouse may
appear on the credit report of the other.
- Advantages/Disadvantages: If you're not employed outside the
home, work part-time, or have a low-paying job, it may be difficult
to demonstrate a strong financial picture without your spouse's
income. But if you open an account in your name and are responsible,
no one can negatively affect your credit record.
Joint Account: Your income, financial assets, and credit history -- and your
spouse's -- are considerations for a joint account. No matter who handles the
household bills, you and your spouse are responsible for seeing that debts are
paid. A creditor who reports the credit history of a joint account to credit
bureaus must report it in both names (if the account was opened after
June 1, 1977).
- Advantages/Disadvantages: An application combining the
financial resources of two people may present a stronger case to a
creditor who is granting a loan or credit card. But because two
people applied together for the credit, each is responsible for the
debt. This is true even if a divorce decree assigns separate debt
obligations to each spouse. Former spouses who run up bills and
don't pay them can hurt their ex-partner's credit histories on jointly-
held accounts.
Account "Users": If you open an individual account, you may authorize
another person to use it. If you name your spouse as the authorized user, a
creditor who reports the credit history to a credit bureau must report it in your
spouse's name as well as in yours (if the account was opened after June 1,
1977). A creditor also may report the credit history in the name of any other
authorized user.
- Advantages/Disadvantages: User accounts often are opened
for convenience. They benefit people who might not qualify for
credit on their own, such as students or homemakers. While these
people may use the account, you -- not they -- are contractually
liable for paying the debt.
If You Divorce
If you're considering divorce or separation, pay special attention to the status
of your credit accounts. If you maintain joint accounts during this time, it's
important to make regular payments so your credit record won’t suffer. As
long as there's an outstanding balance on a joint account, you and your
spouse are responsible for it.
If you divorce, you may want to close joint accounts or accounts in which your
former spouse was an authorized user. Or ask the creditor to convert these
accounts to individual accounts.
By law, a creditor cannot close a joint account because of a change in marital
status, but can do so at the request of either spouse. A creditor, however, does
not have to change joint accounts to individual accounts. The creditor can
require you to reapply for credit on an individual basis and then, based on
your new application, extend or deny you credit. In the case of a mortgage or
home equity loan, a lender is likely to require refinancing to remove a spouse
from the obligation.
