What happens when you need a loan, and your spouse doesn’t know about your credit card debt? A reader, Roni, wrote in with this question:

My husband and I are looking to purchase a new home – honestly, i know we can afford the payments, they are not that much more than now.

I have put away all of my credit cards and stopped using them for about 4 months but owe about $18,000.00 on them. They are all in my name, and my husband does not know that this debt exists.

Will he find out about my debt if I take care of all the bank information and warn our banker not to mention it to my husband? Roni

Dear Roni,

Thanks for your question! I’m not even going to touch on the right or wrong of this – different strokes for different folks. Not every couple manages their money together.

So, will he find out? Yes, probably. Especially if you get rejected for the loan based off of your existing debt. If you are really serious about buying this house, then you’ll want to do your homework first.

Check your credit score, and his

If either one of you has a credit score under 750, (and maybe even then) your outstanding debt is certainly going to come up, and may even be the basis for a denial of your loan application.

Lending policies have tightened up with the rest of the economy – It’s a good time to buy a house if you have great credit.

If you don’t it’s going to be like getting stuck under a very hot microscope.

So, check your credit scores to see where you stand.

Next, get all of your paperwork together, and call a banker that you don’t plan to use. Tell them what your credit score is, and ask them exactly what you asked me. Ask them what you should do. Or, call the banker that you do plan to use, and explain the whole situation.

If you both have great credit scores, and you can warn your banker beforehand, then you *might* be able to skate by on this. You are certainly going to have to be pro-active though, or it’s going to come up. It’s probably going to come up anyway, so be prepared for that if you are serious about borrowing money for a house right now.

Wish I could give you better news – thanks for your question.

Advice I wish I had when I was 22:

A reader, Chelsie, wrote in with this question:

So, I’m 22, I’ve got pretty good credit but since I’ve not had a steady job for more than a year i need a co-signer for a $6000 loan. If everything goes smoothly for paying back the loan, does it improve my credit score or only my co-signers?

I read an article where sometimes a co-signer will start a pattern of banks asking for co-signers. how can I get good credit if I can’t even get a loan without a co-signer? Chelsie

Hi Chelsie, those are good questions.

Yes, if you get a co-signer then everyone (no matter how large or small the loan is) is going to want you to get a co-signer from now on. Your next apartment, your next car, everything will require a co-signer, or be more difficult to get without one.

Now, if you do get a co-signer, then the loan will raise your credit score, if you do things right. If you can’t afford to pay back the loan at any point, you will ruin your co-signer’s credit. They are also liable for the debt if you can’t pay, so think carefully about who you obligate to that. Things like this can split families, and I’m not kidding!

The best thing that you can do in this situation is to keep looking for work, and put off the loan if possible.

The best ways to raise your credit score when you can’t get a loan are pretty simple. I’m going to give you a quick rundown, with links to the specific articles that explain how to do it:

• Clean up your credit report - Some of the negatives on your credit report can be slowly removed. This will raise your credit score.
• Get secured loans - You can either start using secured credit cards, or use a CD to secure a loan, either one (or both) will help raise your credit score.
• Check into pre-paid credit cards - Once you have a regular job, you can set up a pre-paid credit card to use like a debt card. For a small fee (about $10/month) these pre-paid credit cards will report to all three credit bureaus for you, and you can raise your score that way too.
• Keep your credit balances low, and make your payments on time - This is one of the most important ways to raise your credit score. Keep your balances under 30% of your available credit (the lower the better) and never be late on your payments.
• Rinse, Repeat - Cleaning up damaged credit is a lot of work, time and sometimes aggravation. But it works. Be persistent. You don’t want to spend the next 8 – 10 years of your life dealing with damaged credit, or worse, heading into bankruptcy because you can’t afford the loans that you have.

Thank you so much for your question Chelsie, I know you can do this! Even if you end up having to co-sign on this loan, just make sure that you get a steady income, and still take the credit repair steps. You will thank yourself in about five years when you are ready to move forward in life and you have a high credit score to help you do that.

Have a question for us? Leave a comment below!

Keep Reading:

• Do You Lie to Your Spouse About Your Credit Cards?
• Make A Statement (On Your Credit Report)
• Can Your Spouse Hurt Your Credit Score? The Good, The Bad, And The Ugly

This entry was posted on Thursday, February 19th, 2009 at 07:45 and is filed under Debt In Your Marriage?. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.