How important is your credit score? It doesn't generally affect your daily life but ignoring your credit score can cause serious financial problems.
Are you unconvinced? Consider the case of Cameron v. Cameron.
The New Jersey case concerns a divorce settlement where the wife would keep the home. The home had an outstanding mortgage in both names, so the husband made arrangements to transfer his interest in the home to the wife, once the wife refinanced in her name only – removing the husband from responsibility. The wife had nine months from the date of the settlement to comply.
The wife didn't follow through on her refinancing obligation, and the husband didn't bother to enforce it. However, the husband didn't realize that his credit was affected by still being listed as a co-owner on the home.
Two years later, the husband applied for a mortgage loan on a new home and discovered that he couldn't get a favorable interest rate because of his remaining obligations on the original home. His credit rating was poorer than he realized.
Had the husband bothered to check his credit score, he would have suspected there was a problem – and a check of his credit report would have confirmed it. The mortgage loan would have been listed with active payment history over the last two years.
The husband filed suit to enforce the settlement and give him the necessary legal status to execute the sale of the home. He won his case even though he didn't take immediate action at the expiration date. In their decision, the court noted the importance of good credit, writing, "It is critical to consider the economic significance which credit reports, credit scores, and creditworthiness presently have in everyday American life."
In layman's terms, a credit score is a valuable asset to protect and defend.
Cameron v. Cameron drives home two important points about credit scores.
1. Joint accounts must be managed and monitored carefully, with all account holders keeping track of obligations and following through on them.
The issue was an unenforced mortgage loan obligation in Cameron v. Cameron, but the principle applies to all joint accounts – like spouses with combined credit card accounts/loans, co-signed credit cards or loans, or shared bank accounts. Marital status isn't relevant – only that the account is jointly held. (While bank balances won't affect your credit score as directly as the other examples will, they could indirectly drop your credit score through issues like insufficient funds for automatic payments).
If you're a responsible party on an account, keep tabs on it whether or not you're the primary user. When joint accounts are no longer needed or useful, make sure ownership is properly updated or the account is dissolved – and verify that any corresponding agreements are fulfilled.
2. Credit scores are too important to be ignored.
In Cameron v. Cameron, the court wrote, "...a positive credit rating and score is one of the most valuable and important assets a party may presently possess... Reciprocally, a negative credit rating and score can have a detrimental and sometimes disastrous effect on the party's financial health." We can't say it any better.
Check your credit report for any errors or fraudulent charges/accounts, and immediately address any problems that you find. Monitor your credit score regularly and check all credit card and bank statements – including joint accounts. If your spouse or joint account holder wants a separate card, that's fine as long as you discuss finances and trust issues upfront. It's infinitely better to communicate via pillow talk now, rather than through lawyers later.
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