Your partner drives a BMW, loves to dine at five-star restaurants, and lives in the trendiest part of town. It seems as though your love is financially successful – until the two of you share your credit scores. Suddenly, you realize that fancy lifestyle is completely financed by credit, which isn't always paid on time.
Okay, this might be a hyperbolic tale, but the principle remains true: you want this insight before the two of you say, "I do." You might even want it before living together, because love can actually affect your credit score.
Here are four ways your relationship can have an impact on your credit score:
1. Credit history helps you determine how your partner will handle money in a marriage
A low credit score (less than a 620) could be caused by late payments, bills sent to collections, or maxed-out credit cards. A high credit score of 700+ probably means using a credit card wisely and never missing payment due dates on bills.
This isn't to say a sub-prime credit score is a reason to run screaming from the relationship, but it does give insight into how your partner will likely handle money in the future. Considering how often money is cited as a reason for relationships and marriages falling apart for both heterosexual and same-sex couples, it's important to lay the foundation for a healthy financial relationship early on.
2. Joint accounts and joint applications in marriage
Maybe the love of your life made some financial indiscretions in his youth and is now working towards a healthy credit score. Don't be alarmed – marriage does not mean your credit scores will suddenly become intertwined. You both will continue to have individual credit scores as there is no "marriage credit score."
However, even though your credit scores won't merge, your partner could impact your credit score if you have joint accounts, such as a credit card. Should your spouse mismanage a joint account, it could mean a ding on your pristine score.
Your spouse's poor credit could also keep you from getting approved for a mortgage or other loans if you apply jointly. Lenders will take both of your credit histories into account when underwriting an application. Fortunately, there is a possible workaround. The partner with a stronger credit history can apply as an individual to get the lowest possible interest rate.
3. Just living together could still impact your credit score
Should you choose to co-habitat without the legal step of domestic partnership or marriage, then you may think a partner's credit score doesn't really matter… but you'd be wrong.
Sharing financial accounts can be an effective way to simplify your lives once you live together. However, these shared accounts may also influence your credit score:
- Joint bank accounts will not be on your credit report and impact your credit score, unless they end up overdrawn and get sent to collections.
- Joint credit cards will impact a credit score. Think positive, it could help improve your score should you both use credit wisely. But mismanagement, such as your partner maxing out a card, means a strike against you too.
- Missing bills is another way cohabitation alone could ding you. Let's say your name is on the utilities or you share a cell phone plan, but your partner handles making the payment and accidentally misses a month – guess who gets punished?
4. Divorce and your credit score
Should you find yourself in a position to "consciously uncouple" then you need to be proactive about protecting your credit health. This usually means removing all shared accounts as quickly as possible, because your credit score may take a beating in one of three common ways:
- Shared accounts aren't being paid: Just because you moved out doesn't mean the auto lender or mortgage company is removing your name off an account. If your ex is supposed to be paying the bills, but misses due dates, then your credit will get bruised.
- Your ex gets vindictive: Nasty separations could mean your ex is looking to harm you deliberately, even at his or her The spurned one may max out joint credit cards or stop paying bills bearing your name.
- Your paycheck can't make ends meet: It might not be your ex at all but rather that you're unable to keep up with the monthly bills without your former partner's paycheck. You'll need to downsize ASAP to mitigate the fallout of bounced checks and overdrafts.
The easiest way to protect your relationship
One simple step safeguards your relationship from money being the source of its demise: a monthly budget meeting. Open an adult beverage and have an adult conversation for thirty minutes to get synced up. In a loving, supportive way, check that bills are being paid, see if you are meeting both your individual and shared financial goals, and figure out how to communicate appropriately if anything
If you would like to monitor your credit to prevent identity theft and see your credit reports and scores, check out our credit monitoring service.