Buying a House With a Partner Who Has Bad Credit

It’s not easy to do, but you have some options

A couple looks at a mortgage application.
•••

sturti / Getty Images

Buying a home with your spouse or partner is great because you get to use your combined income and shared assets to meet the lender’s borrowing criteria, which can expand your homebuying budget.

But what happens if your better half has poor or nonexistent credit? Unfortunately, your significant other’s subpar credit score can deflate your joint homeownership dreams—even if your own score is stellar.

Learn more about how lenders evaluate joint mortgage applications, how to improve your partner’s credit score, and other ways to buy a home with bad credit.

Key Takeaways

  • When you buy a home with someone else, lenders consider all financial factors for both applicants, including credit scores.
  • If one applicant has bad credit, it could reduce your chances of getting approved for a home loan.
  • Focusing on improving credit habits can help your partner increase their credit score over time.
  • If you don’t want to wait and have enough income on your own, you can try applying for a mortgage as a single applicant. Otherwise, you could look for alternative loan programs for people with poor credit.

How Do Joint Mortgage Applications Work?

The ability to meet a lender’s qualifications is one of the key things to consider before you buy a home. That means if you’re buying with a partner, you’ll both have to do some self-assessment. For joint mortgage applications, lenders look at each co-borrower’s entire profile rather than pick and choose each applicant’s best attributes. In other words, the lender will count your combined incomes, but it will also review both of your credit scores.

And here’s the real gut punch: Some lenders base their lending decisions and terms on the lower of the two credit scores. In that case, if your partner’s credit is awful, it could put your plans in jeopardy even though you have two incomes. Your only real options might be to put your homebuying plans on hold until your partner can improve their score, or work with a mortgage lender that specializes in bad credit.

Work with a mortgage professional to go over all of your loan options. For example, some lending programs, like those from the Federal Housing Administration (FHA), may have less stringent credit score requirements if you can make a bigger down payment.

How Your Partner Can Improve Their Credit Score

Remember that credit scores can be affected by many factors, some of which are outside your partner’s control. For example, emergencies, a lack of access to credit products, and discriminatory lending practices could all result in a lower score or a shorter credit history. If you’re committed to buying a home together, you’ll need to take a “for better or for worse” approach to your finances and find ways to help your partner  improve their credit. Here are some ideas.

Clean Up Credit Report Errors 

The first step is to make sure the bad credit score is actually warranted. Everyone should periodically review their credit reports to check for potential errors, such as a creditor saying you owe money on an account that you paid. Plus, you want to make sure no fraudulent accounts have been opened in your partner’s name, potentially leading to the negative score.

Start by pulling your free credit reports from each of the three credit bureaus—Experian, Equifax and TransUnion—via AnnualCreditReport.com. If there are mistakes or anything is amiss, follow the corresponding bureau’s steps for fixing the credit report.

Pay Down Existing Debts

It might be worth using some of that down payment money you’ve saved up to pay down large credit card balances. That’s because a key element of the credit score calculation is credit utilization, or how much available credit is being used. 

If your partner has a $5,000 credit limit and a $4,000 balance, they’re using 80% of their credit line. If you can make a lump-sum payment to get the utilization below 30% and as close to zero as possible (a threshold that experts say is ideal), they should see an increase in their credit score within a couple of months.

Add Your Partner as an Authorized User

Payment history is the top factor in determining one’s credit score, which is why missed payments or delinquencies can do a lot of damage to your partner’s credit. To help establish a good pattern of payment behavior, you might consider adding your partner onto one of your credit card accounts as an authorized user. This will let them piggy back on your (hopefully) strong credit.

As the primary cardholder, you are on the hook for your authorized user’s activity. In other words, be mindful that when you allow someone onto your account, you take on the responsibility of paying off all charges, no matter who incurs them. And if you don’t, your credit score is on the line.

Suggest That Your Partner Open a Secured Credit Card

If your partner’s credit is so poor that they can’t qualify for a regular card, a secured credit card can help them rebuild their credit reputation. They’ll use a cash deposit as collateral in the amount of the credit line, usually a couple of hundred dollars. From there, your partner should make small charges on the card and pay off the balance in full each month. Over time, as they make consistent payments, they should start to see their credit score improve.

Set up automated minimum payments on all of your individual and shared accounts so that you never have to worry about either of you missing a payment—and hurting your credit scores.

Alternatives to Buying a Home With a Partner

If buying a home together with a traditional mortgage isn’t in the cards, there are a couple of other options to consider. 

Apply as a Single Applicant

If you think you have enough income to qualify for a loan on your own, you can go ahead and apply solo. Remember that you’ll generally need a debt-to-income ratio of 43% or less to qualify for most loan programs—meaning that all of your combined monthly bills can’t be more than 43% of your gross monthly income. If you’re coming up short, you may have to look at homes in lower price ranges to find one that’s affordable on paper.

If you live in a community property state, FHA and Department of Veterans Affairs (VA) lenders will factor in your spouse’s debts even if their name is not on the loan application. Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

Wait, Then Try Again

Improving credit doesn’t happen overnight, and everyone’s time line can look different. Depending on the amount of improvement your partner has to make to reach good credit territory, it may take a few months, a year, or more. It might be worth contacting a credit counselor to get some guidance and put together a plan of action. Or in some cases, such as if you only need to increase by a few points to get approved, a lender may be able to make a “rapid rescore” work to your advantage.

Get a Bad Credit Mortgage and Refinance When Credit Improves

If you’re willing to accept a higher interest rate, you could work with lenders that specialize in loans for people with bad credit. Just be very careful if you go this route, because even if you intend to make credit improvements and refinance into a better mortgage down the line, life circumstances could prevent that from happening. Be sure that any alternative loan you consider has terms that you can afford and live with in the long term.

Frequently Asked Questions (FAQs)

Will it be harder to buy a home if my partner has good credit but no income?

Lenders look at several factors when determining if borrowers are eligible, including income and credit history. You can still co-borrow if your partner has no income, as long as your income is sufficient—just know that both parties share the loan responsibility equally. On the other hand, having two ample incomes won’t be enough to overcome one partner’s bad credit if the poor score is below the lender’s minimum requirements.

Who can help me buy a house if I have bad credit?

If you have bad credit, you can work with a housing counselor who can go over your options. Look for an agency that is approved by the U.S. Department of Housing and Urban Development (HUD).