Credit scores are with you for life no matter your relationship status. There’s no merging of credit scores after marriage like you may do with a bank account. But, your partner’s money habits can still have an impact on your score; and divorce has a nasty habit of bringing a once powerful score to ruins.
This doesn’t have to be the case though, which is why it’s important to always have open communication with your loved one about money as well as continue to build and maintain your credit score no matter your relationship status.
Why You Should Know Your Partner’s Credit History
Love has a funny way of allowing you to excuse bad behaviors from your partner, but a credit report doesn’t accept lines like, “I was young and dumb.” Sharing your credit reports and scores with each other is one easy way to start decoding potential financial issues in the future. You can see if your partner has a history of missing payments or if he or she constantly applies for credit cards and loans. Credit history also gives you insight into how well your partner handles a budget and how heavy a debt burden he or she may be bringing into a future together.
A poor credit score and the checkered report isn’t a reason to just ditch your partner right then and there – but it should start conversations about how you two will manage money together in the future and illuminate potential obstacles to financial success if you were to take your relationship to the next level.
Marriage and Credit Scores
Contrary to common credit score myths, upon marriage, your spouse’s shady credit past won’t be the undoing of your pristine 800 credit score. There is no merging of credit reports and credit scores once you say, ‘I do.’ Separate accounts prior to your nuptials and those held after won’t be reported on both credit reports just because your tax filing status is married. Joint accounts, of course, will be reported for both of you. If your spouse is in charge of paying the bills on a joint account, perhaps a mortgage, and becomes delinquent then you’re likely to see a painful drop on your credit score.
Changing your name won’t undo your years of diligent credit usage either. You’ll just want to monitor your reports more closely during the months after your name change to ensure all the reported information is accurate. By Federal law, you’re entitled to one free copy of your credit report from each of the three bureaus (Experian, TransUnion, and Equifax) per year. You can download these reports by going to annualcreditreport.com. Monitoring your credit score and seeing a significant drop for no apparent reason is an indicator that there may be misinformation on your report.
Ways Your Partner’s Credit Score Can Impact You
There are some common ways a partner could be impacting your credit score directly and vice versa, like missing monthly bills or having a shared item go to collections, but sometimes it’s your partner’s actual credit score holding you back.
While a strong score could help you get a decent mortgage rate, a poor one could also be the reason you both get denied for renting an apartment. Lenders don’t just take an average of your two credit scores to determine if you as a couple are reliable. The lower score could be scaring off lenders and landlords alike. One way to negate this issue is not only to work on improving your partner’s credit score, but, depending on your situation, it could be wise just to have the person with the stronger credit history apply for a loan.
Credit Score Matters Regardless of Your Income
Credit scores are for life, so you should always be actively protecting and maintaining a healthy credit history. This holds just as true for stay-at-home parents as it does for primary breadwinners. Having a single credit card in your name and diligently using 30% or less of the available credit limit and then paying it off on time and in full will yield a healthy score. Credit scores do not account for income (although lenders do) – so you don’t need to be earning a steady income to have a 700+.
One reason it’s important to protect your own credit score, especially as a stay-at-home parent, is to provide yourself with financial flexibility in the future should something change in your relationship status. In the case of divorce or death of a spouse, it’s important to be able to handle the family finances – which may include applying for a mortgage or auto loan, or needing to apply for a rental property during which time a landlord would run a credit check.
Divorce and Credit Scores
Credit scores can often take a beating if you decide to divorce. There is a myriad of ways in which separating from your partner could be damaging to your credit history.
The ex skips payments
A divorce decree doesn’t always match up with your contract to a lender. Perhaps your partner got the car in the divorce, but your name is also on the loan. The divorce decree doesn’t remove your name from the contract with the lender and if your ex starts missing payments, then it could tank your score too.
You can’t afford your bills
Not only is divorce itself costly, but it means a major shift in how much flows into your bank account. It’s possible you start to find it difficult to juggle various bills without a second income stream and begin missing payments.
Someone wants to get even
Your partner likely has access to joint accounts, is an authorized user, or even enough information about you (address, Social Security Number, birth date) to apply for credit in your name. It’s not unheard of for a spurned ex to start making charges or missing payments just to bring financial pain.
However, divorce itself does not damage your credit history. If you’re able to pull a Gwen and Chris and “consciously uncouple” without much angst, and you’re still living well within your means, then there shouldn’t be a dip in your score. Be sure to take steps to protect your credit in a divorce by removing your ex as an authorized user on any accounts, closing joint accounts, and ensuring bills get paid on time – don’t just assume the ex is going to handle it.
Five Ways You Can Help Improve Your Partner’s Score
Credit scores are incredibly easy to improve, especially if you’re working as a team.
1. Put your partner as an authorized user on your card: You don’t even have to give your partner a credit card, but just having your positive credit behavior reporting to the bureaus on his or her behalf should help start boosting a score.
2. Get your partner a secured credit card: Not fond of adding your partner to your card? Have your partner get a secured credit card, basically a credit card with training wheels. This credit card requires a refundable deposit that becomes the credit line for the account. Example: a $500 deposit means you have a 500 credit line. Once your partner has the card, just link it to pay something small like the monthly Netflix bill and then automate it to pay that bill off on time and in full. You’ll see that credit score rise in no time.
3. Work together to pay down debt: This is only advised if you’re married and therefore legally linked together, but helping pay down existing debt and lowering utilization ratios on credit cards helps bring a score up.
4. Make sure bills get paid on time: On-time payments account for 35% of a credit score, so just making sure bills get creditors get paid by the due date will get that score moving in the right direction.
5. Set monthly check-ups: Set a monthly money meeting with each other so you can go over how well you’re reaching your financial goals and check in on your credit scores to track movement.
Credit scores will always come up once you are in a long-term relationship – whether it’s renting a home with your partner or when it comes time to share credit card accounts or take out a cosigned loan. It’s important to take the appropriate steps toward sharing your credit history and working toward a pristine credit score for both of you. It’ll likely save you some money (on loan interest rates) and will keep financial animosity from creeping into your love life.
Life insurance that's actually simple.Estimate your rate
Did you miss Part 1? Erin explains what you need to understand about your credit score and how to improve it.
Erin Lowry is the founder of Broke Millennial, where she uses sarcasm and humor to explain basic financial concepts to her fellow millennials. Outside of oversharing on her site, Lowry’s musings have also appeared in New York Magazine, U.S. News and World Report, Business Insider and Thought Catalog.