How to Talk to Your Significant Other About Credit Before You Put a Ring on It
Falling in love is easy - finding out everything you should know about the one you love can be trickier.
Take for example your credit history. Sooner or later, when it comes time to discuss opening a joint account, buying or leasing a car together or getting a mortgage, you're going to have to get real with your significant other about your past relationship with money management - especially if your credit score is low.
And considering that money is the leading cause of stress in relationships, and research shows that vastly different credit scores may point toward long-term instability and even divorce, smart couples will work together to figure things out. Like every other aspect of your relationship, the journey to consciously couple your finances requires honest, clear communication about where you stand - and where you want to go together.
Here's all you need to consider when you're getting ready to settle down with not only your significant other, but also his or her financial reality.
You may be committed - but your credit score always stays single
While there are many ways to merge your finances and you can opt to file your taxes jointly once you're married, your credit score is and always will be yours alone.
If you're the person with the strong credit score, this might sound like great news - that somehow you won't be affected your partner's past issues. And if you're the one with the lower credit score, you might think that your credit score will automatically go up, or at the very least, won't drag your loved one's down.
The truth is that when you apply for a loan or account together, banks look at both of your credit history and scores. One strong score doesn't usually compensate for a low score - especially if you're applying for a large loan, like a mortgage. And while you can try putting just one name and using one score on the application, chances are you won't quality for as much as you need. Or if you do, then only one person officially owns the home - which can create a significant imbalance in your relationship.
Don't despair - if love is the answer (and it always is), it's time to ask the question of how to solve the issue of disparate credit scores.
The first step to forever… financially speaking
The first step to get on the same page when it comes to your hopes and dreams for the future is to share with each other the truths about your credit history, past and present. As Experian advises, "put all your financial records — savings, salaries, investments, real estate and especially credit — on the table."
You should also both get copies of your credit reports from all three bureaus - Experian, TransUnion and Equifax, which is available to you for free once annually. Take some time to go through your reports together. This can provide you with crucial information beyond the numbers on the page. If your partner has a habit of late payments, accounts in collection, evictions or other significant black marks on his or her credit history, it's worth a frank conversation to be sure he or she is ready to settle down into a healthier relationship with positive financial habits.
How to give a low credit score some love, together
There are lots of ways to boost a low credit score, and here are a few that you can do together:
1) While you're doing a joint review of each other's credit history, help your partner identify any mistakes that may be dragging his or her score down. While disputing wrong information on a credit report is a legal right, doing it takes time, energy and effort. Tackling corrections with the help and support of a partner can make it easier and even more fun.
2) If you're living together in a rental, have the person with the low credit score pay the monthly payment using a certified rent reporting agency like RentTrack. That's a great way to boost a credit score without incurring debt.
3) Either co-sign for a credit card for your partner or have him/her become an authorized user on your credit card account. Just remember not to open too many accounts at once, as that can have a negative impact on a credit score.
4) Divide and conquer by splitting the bills down the middle. On-time, consistent payments account for 35-percent of your credit score and is one of the simplest and easiest ways to increase it.
Planning a life together is one of the most profound aspects of any long-term commitment. Before you put a ring on it, be sure that you've done all you can to ensure the smooth transition as two financial histories become one.