The Romantic Side of Credit
With Valentine's Day just around the corner, love and romance or flowers and chocolates might be on the brain. Even though those items are important, sitting down and taking an unromantic look at your finances and credit can help you and your partner have a deeper relationship.
Couples--especially those thinking about combining households or getting married--should sit down with each other and go over their financial situation to make sure they're compatible. Not agreeing on money matters can be one of the biggest factors in divorce cases, notes MyFICO, the consumer division of the credit rating company.
Even if you're combining households, you're not necessarily fully combining your financial lives. For instance, a credit report is only tied to an individual, not to both you and your spouse, so you'll always have your own personal credit history. This doesn't change even if you have joint credit card accounts. If your spouse has lousy credit, it won't affect you because you're only responsible for the debt that you personally incur, says TransUnion, another of the major credit reporting bureaus.
Granted, that's a little different when it comes to having a joint account, like a credit card in both of your names. If you're applying for credit together, a card company will consider both of your credit histories, says Experian, one of major credit reporting bureaus. If one of you has poor credit, you'll both be affected by in in the terms of the joint account.
A joint account will show up on each of your credit reports, but it will only affect you individually. That said, if you co-sign on a credit card that's in your spouse's name, but your spouse doesn't make the payments on it, it will affect your credit score too, says MyFICO.
Perhaps you're getting married to someone who has no credit history at all. You can help your spouse build her own history by adding them as an authorized user to one of your credit cards, says Experian. A credit report will include authorized users, which will help them build up credit.
However, an authorized user isn't responsible for any debt repayment, notes Experian, so you may want to use this as a temporary situation until your spouse does build up enough credit history and can either get her own individual credit card or qualify for a joint account, which means you'd both be responsible for repaying any debt.
Romance sometimes isn't enough to save a relationship. If you get divorced, you're still responsible for any joint credit card accounts you and your spouse may have. You'll still need to make payments on any credit card debt, or else it will negatively affect your credit rating, says MyFICO.
Having an individual credit card may also help in case of divorce because it allows you to maintain credit independence. If you and your spouse only had joint account and decided to get a divorce, it would better to close those accounts. Having a separate credit card would allow you to having continual access to credit and maintain your credit history, says Experian.
While no one goes into a relationship or marriage hoping for a breakup or divorce, not communicating about financial issues can be a major factor in a failed relationship. Being upfront and open about your financial habits and credit history as an individual can help build a stronger relationship between you an your partner, says MyFICO. It may not be the most romantic topic in the world, but having a good understanding of each other's finances can prevent major relationship issues and keep the romance alive for years.