Can I Help Improve My Partner’s Credit Without Jeopardizing My Own?

Can I Help Improve My Partner’s Credit Without Jeopardizing My Own?

Written by Bryan Daly
Fact-checked by Caitlin Wood
Last Updated August 12, 2022

Is your spouse or significant other having credit issues? Is their low credit score preventing them from accessing loans and other credit products? While bad credit isn’t the end of the world, it can be a problem if your partner is trying to get approved and save on interest in the process. Their bad credit can also be problematic if you’re applying for a loan together, such as a joint mortgage, where approval would be hard to obtain if one borrower isn’t as strong financially as the other. 

That being said, bad credit isn’t permanent. It may take some effort on both your parts, but restoring your partner’s credit will definitely be worth the struggle.

How To Help Improve Your Partner’s Credit?

If you want to help your partner improve their credit so that you can apply for a joint mortgage in the future or simply because you want them to have the same financial freedom that you have, the good news is there are a few things you can do to.

Add Them To Your Credit Card Account

If you’re a responsible credit card user, you can use that to help improve your partner’s credit scores. You can add your partner as an authorized user on your credit card account, which means they’ll have the ability to use your credit and benefit from the payments you make. The payments you make will be recorded on both your credit files which will help your partner build a positive payment history.

However, be sure to verify your creditor does report the payments on both your credit files as not all do. 

Cosign A Small Loan For Them

Paying off a small loan is a great way for your partner to improve their credit, but if they can’t qualify for one on their own you could cosign for them. This will not only help them qualify for it but they’ll likely be able to secure a lower interest rate. Do note, that as a cosigner you’ll be liable for the loan if your partner is unable to pay for the loan. 

Debt Consolidation Loans

 If your partner’s debt is the root of their credit problems, they may benefit from a debt consolidation loan. However, these loans do often require a borrower to have good credit, by cosigning for them you can help them gain access to the debt relief they need to improve their credit.

Get Them A Secured Credit Cards

These cards are for borrowers with bad credit or who can’t get approved for a normal card. Your partner will need to offer a security deposit equal to their desired credit limit. They can then use the secured card to improve their credit. Every payment they make will help them rebuild their payment history. Once they’ve paid back their full balance, they can cancel the card, collect their deposit, and apply for a regular unsecured card.

Best Secured Credit Cards

Annual FeeInterest RatesMin. Deposit
Neo CardTM (Secured)$019.99% - 24.99%$50
Plastk Secured Visa Credit Card$48 (+$6 monthly fee)17.99%$300
Home Trust Secured Visa Card0$ or $59- 19.99% (no annual fee)
- 14.9% (with annual fee)
$500
Vancity enviro Secured Visa Card$0 - $39511.25% - 19.50 %$500
TD Secured Credit Card$2919.9%$500
Capital One Guaranteed Secured Mastercard$5919.8%$75

Other Ways To Help Your Partner Improve Their Credit

Additional ways you can help your partner repair their credit without hurting your own is by helping them develop better financial habits. 

Help Your Partner Make Responsible Payments

Payment history is one of the most important factors that can affect your partner’s credit scores. As such, it’s crucial that your partner makes responsible payments on all their active credit products. Whether the products are revolving or installment-based, it’s essential for them to pay all their bills on time.

Ways To Avoid Missing Payments

  • Setting up automatic payments  You can set up automatic payments from your chequing account to your credit card and other bills. You can also ask your provider to directly debit the payments from your account. 
  • Changing your billing due date – If you have multiple bills to pay every month, it can be difficult to track, especially if they all have different due dates. To better manage your bills, you can ask your lender or creditor to change your billing due date, so that you can align your payments.

For the ins and outs of asset-based financing, watch this.

Help Your Partner Pay Down Debt

Paying down their other existing debts is another essential step for your partner to take. Having debt can make a bad financial situation even worse, especially when that debt is spread out through multiple lending sources. 

With several unpaid balances and payment dates to worry about, it can be tough to keep track of and pay off every expense that comes their way. This leads to forgotten payments, which ultimately results in credit damage. 

Disputing Credit Reporting Errors

Your partner’s damaged credit might not even be their fault. Information can sometimes be reported incorrectly. Elements in their personal profile (name, social insurance number, address, etc.) might also be incorrect. Or, even worse, the errors could be caused by fraud or identity theft.

Any of these common errors can cause credit damage if they go uncorrected.  As such, it’s best to check your credit report periodically for errors. Both credit bureaus in Canada offer credit reports for free in Canada. If you find a mistake, be sure to dispute it with the bureau in question. If the error is legitimate, it will be corrected within a few days.

How To Dispute An Error On A Credit Report

How To Dispute An Error With TransUnionLearn More
How To Dispute An Error With EquifaxLearn More

Reducing Their Credit Utilization

When it comes to revolving credit products, your partner’s credit utilization ratio (debt-to-credit ratio) will be particularly important. Debt-to-credit ratios account for around 30% of credit scores depending on the credit scoring model used. In general, a ratio of 30% or lower is recommended.  Higher ratios could have a negative impact on credit. If your partner wishes to avoid this potential credit damage, they should strive to use 30% or less of their available credit as possible. 

Credit Counselling

When their credit situation is becoming unmanageable, your partner can seek out a licensed credit counsellor. They can provide your partner with the right information and solutions to resolve their credit and debt related issues. 

What Is Considered A Bad Credit Score? 

Once a credit score falls below 560, it’s considered to be poor or bad. When a lender performs a credit check and see’s this, they may reject you or your partner for a loan.  If approved, you’ll usually be given a higher interest rate than they would receive with good credit. 

Are There Lenders Who Accept Bad Credit?

Bad credit certainly lowers approval chances in general, especially from banks and other prime lenders, where strict standards need to be met during the application process. However, there are private and alternative lenders that you or your partner can apply with, who may accept their application and offer them a slightly higher interest rate.

Difference Between Revolving Credit And A Loan?

Your partner should also understand what kind of credit product they’re dealing with in the first place. There are two types of credit available to Canadian borrowers, known as “revolving” and “installment-based” products.

Revolving Credit Products

This category applies to products like credit cards and lines of credit, anything that involves a revolving credit limit, rather than a set loan amount. Your partner can borrow from that designated limit as they need, then repay those amounts on a monthly basis. In addition, they’ll only have to pay interest on the amounts they’ve borrowed.

They’ll also have the option of making a minimum monthly payment. While it’s not a great idea for your partner to continually make minimum payments, as they’ll be incurring interest on the unpaid balances, doing so should help them avoid penalties. They can withdraw from and repay their credit limit until their product expires, wherein they are free to renew the account or cancel it and move on.

Installment-Based Loans

This category is more commonly associated with products like personal loans, mortgages, car loans, short-term loans, and of course, installment loans. Unlike revolving products, your partner will request a specific loan amount. If they’re approved, that loan will be deposited directly into their bank account.

Whether or not they actually use any of that money, they’ll be given a certain timeframe within which they must repay it through equally divided installments. That payment schedule can be negotiated with their lender so that it’s suitable for their financial needs, but generally takes place over several months to several years, depending on the loan amount. Once all their full balance has been repaid, your partner can apply for another loan or move on to their next endeavour.

FAQs

What happens If I miss a payment on a secured loan?

When you miss a payment on a secured loan, the consequences are generally the same as an unsecured loan. You may be charged with a late penalty fee and certain interest charges. However, if you miss multiple payments on a secured loan, the lender has the right to confiscate the asset in question, then sell it to recuperate part of their loss.

Will my spouse’s credit combine with mine after marriage? 

Even if you’re married, both your and your partner’s credit profiles will remain separate. So, unless you’ve already applied for a joint credit product (wherein both your credit profiles will be affected by your joint payments), neither of your credit actions will affect each other. Even if your partner continues to have bad credit, yours will not change unless you personally do something to jeopardize it, such as by making a late payment.

Should my partner apply to more than one lender?

Let your partner know that even if their first application is denied by their bank or another lender, it’s in their best interest to not apply for new credit multiple times in a row. Every time a lender pulls their credit, a hard credit inquiry gets listed in their report and remains there for up to 2-3 years. Hard inquiries can cause your partner’s score to drop by a few points. Too many credit inquiries also suggest to lenders that you’re a risky borrower. 

Bottom Line

If your partner is a Canadian resident and has used a credit product in the past, they have a credit score. Whether their credit is good or bad depends on how they’ve handled their debt and bills. While there are a few things you can do to help them build credit, it’s ultimately up to them to build their credit by paying their bills and using credit responsibly.

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and travelling the world in search of the coolest sights our planet has to offer.

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