Keep Student Loans Separate

I just paid off the last of my student loans in December. But my husband has thousands of dollars in outstanding student loans that he has never paid on. Do I have to pay his student loans because we are treated as one financial entity? My name is not on his loans, but he did take them out after we were married.

First, the good news. As long as your name is not on your husband's student loans, you're not responsible for paying them off.

That's one reason why it's important for all couples to keep student-loan debt separate when they get married. If they were ever to divorce, the commingled debt would be nearly impossible to untangle. And if one person were to default, the other would be on the hook for his or her ex-spouse's loans.

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But before you heave too big a sigh of relief, consider this: If in fact your husband has never paid on his student loans, he is compiling one heck of a bad credit record in his own name. Until he cleans up his act, it's critical that you maintain all your credit accounts in your own name so that his poor record doesn't rub off on you.

If the two of you were to apply for a joint credit card, for example, both of your credit histories would be considered. And "the worse report would probably get more consideration than the better one," says David Jones, president of the Association of Independent Consumer Credit Counseling Agencies.

This can really hurt if you want to make a major purchase, such as a house or a car, and want both of your incomes to be considered when applying for a loan. To avoid being dragged down by your husband's bad credit, you may need to see if you can get a loan in your name only.

Or wait to make a big purchase until your husband has improved his credit score. The median score is 723. If a score dips into the 500s, "you have a problem," says Craig Watts, of Fair Isaac, the company that compiles the FICO credit scores used by many lenders.

The best way for your husband to improve his score is to pay his bills on time, and pay down those student loans (for more tips, see www.myfico.com). Negative information can remain on your record for up to seven years, but "people with excellent credit habits can recover from the worst credit calamities in two to three years," says Watts.