Warning to Happily Married Couples with Joint Accounts

Credit held jointly can haunt you...especially after a divorce. With the divorce rate as high as it is (about 43% of all first marriages end within 15 years according to a study by the National Center for Health Statistics) be sure of your long-term relationship before you eagerly enter into a loan together.

What most divorced couples find out after it's too late is that both borrowers on a joint account are responsible for the loan—regardless of what the judge says—until the loan is either paid off or refinanced in one person's name.

And if your ex-spouse is more than 30 days late paying the bill, your credit reports will also be affected negatively and your credit scores will plummet.

I've seen it happen hundreds of times. A couple gets divorced, the judge says the husband is responsible for paying off the credit cards and loans, and the wife goes home happy, thinking she's off the hook (or vice versa).

Then, a few months later, after the ex-husband fails to make payments or defaults on some loans, the ex-wife's credit scores sink. And keep sinking.

What I'm trying to say is that a mean-spirited spouse can continue to ruin your credit for many years after a divorce by making late payments (or not making them at all) on any credit held jointly. And if you cannot afford to pick up the slack...things will be rough.

So remember, just because a judge says it's so—doesn't make it so. You have to be proactive and get your name off of all joint accounts...or volunteer to be responsible for all joint accounts to ensure they get paid on time.

For some real world advice...read a collection we've compiled from divorced Life After Bankruptcy readers to give you a balanced perspective. Go here to download the report.

Of course, I'm not trying to promote divorce. I want to show you how to protect your credit.

How the spouse with good credit can speed up the recovery of the spouse with bad credit

OK, let's say that you have really low credit scores and your spouse has great credit scores. The best way for you to increase your scores is to have your spouse add you as an authorized user to their credit card accounts.

As an authorized user—you'll get a new credit card with your name on it—but the primary card holder will still be responsible to pay the amount owed, regardless of who charges on it.

But here's the interesting part. Most lenders will report the entire credit history of the account on the authorized user's credit reports.

So, you instantly get a good credit history added to your credit reports!

But, don't pick just any card to be an authorized user on. You should choose the accounts wisely. I would select the oldest accounts, with the highest credit limits, that have the lowest balances.

Another word of caution...

Just remember, if you're the primary cardholder and any of your authorized users go on a shopping spree, then fly the coop—you're still responsible for the balance owed.

"...But my husband charged my account to the hilt and left me..."

Doesn't matter.

"...But my husband lied to me, stole my children, and left in the middle of the night without me..."

Lenders don't care.

"...But my wife was having an affair with the pool boy and maxed all of my credit cards that she was an authorized user on..."

Tough luck.

You get the idea. Lenders don't care what's going on in your personal life. All they care about is that the balance gets paid. So, if you have good credit, please think twice about sharing it.

And if you're going to become the authorized user of your spouse's credit card, make sure everything's going OK at home first and that there are no surprises around the corner.

Sometimes it's just about your FICO credit scores...putting your best foot forward

When applying for credit cards your scores are either high enough to qualify or they aren't. For example, when you apply for a department store credit card, there's no negotiating. You're either approved or not. The decision is based on one of your FICO credit scores.

So put your best foot forward at the beginning. The person who has the highest FICO credit scores should apply for credit.

Michele and I do this all the time. When it's time to apply for new credit it's all about who has the highest FICO score from the credit reporting agency the lender uses to make a lending decision. Sometimes my scores are higher. Sometimes hers are higher. It doesn't matter to us whose scores they use, we just want to qualify for the best terms.

In fact, the "putting your best foot forward" strategy isn't always exclusive to credit cards—it works with any lender that makes lending decisions based primarily on FICO credit scores.

For example, the car I'm driving right now was originally financed by one of my wife, Michele's FICO scores. When I decided to keep it a little longer, my scores were high enough to get the best terms—so I refinanced using my scores.

You can purchase your credit scores to determine who should be applying for unsecured credit cards right now. Preferably whoever has 700+ scores. Once approved, you can add your spouse to the account as an authorized user.

"By the power vested in me...I now pronounce you...finished reading this article."

Stephen Snyder is the founder of the After Bankruptcy Foundation a non-profit organization that helps people recover after bankruptcy. He has helped thousands of people obtain a credit card after bankruptcy with a fair interest rate.