My husband and I run our finances like a well-oiled machine. We know our roles, share our goals, and both have credit scores over 800. We’re looking to buy our first home in 2018, and things couldn’t be better.
But it wasn’t always this way.
When we got engaged and decided to combine our finances, I came across something shocking—my fiance had no credit score. He didn’t just have a low score, but literally had no credit history to speak of. He had spent his entire adult life paying for everything with cash or a debit card, and had never taken out any kind of a loan or applied for a credit card.
I explained to him that credit scores factor into more than just whether or not you’re approved for a loan. A poor credit score can affect your job prospects, rental applications, and insurance premiums. It’s an important marker of personal responsibility and financial competence.
Thankfully, he was receptive to the message. It only took about a year of consistently using a credit card to get his score up over 600, and over the years he’s become almost as financially literate as me—but I shudder to think where we would be if that issue had gone unaddressed.
Credit may be a personal issue, but your score can absolutely affect your partner financially. Here’s everything you need to know about couples and credit.
How do credit scores work in a marriage?
Unlike tax returns that you can file jointly, credit scores are always tied to an individual and never to a couple. If you have a bad credit score and marry someone with a perfect record, your score won’t improve because of your conjugal connection.
When couples apply for a loan together, the lender looks at both of their scores. Even if one person’s score is good enough, their partner’s low score can disqualify them. You can sometimes work around that by only using one person’s score and income to apply, but that might not work for a large loan like a mortgage.
If you do qualify for a loan by yourself, the debt will be entirely in your name. This can raise some issues if you get divorced and can’t afford to make those payments without your partner’s income. As soon as your partner’s credit score improves, you should refinance the loan in both your names.
Kate and Steve Horrell were applying for a mortgage when the bank noticed that Kate had a collection on her credit report. It was from a hospital bill that had never been filed with insurance and had gone straight to collections. They couldn’t get approved for a loan together, so they decided to apply with just her husband’s information.
Thankfully, Steve had a high enough credit score and income to qualify for the mortgage by himself. After a few weeks, Horrell was able to resolve the billing issue and fix her credit score.
Why credit scores matter
Lenders aren’t the only ones who use credit scores. Employers, landlords and utility companies all look up your credit score before approving you. A low credit score can make it harder to find an apartment or get approved for a cell phone plan without a deposit.
Bad credit scores can also spell disaster for your relationship. A 2015 survey from SunTrust Bank discovered that money was the number one cause for marital disputes and one of the top reasons for divorce.
Data from a 2015 Federal Reserve study also shows that couples with disparate credit scores were more likely to get divorced, theorizing that “credit scores reveal an individual’s relationship skill and level of commitment.”
How to improve your credit
Fortunately, improving your credit score isn’t complicated. First, find your credit report at AnnualCreditReport.com, where you can get a free copy from the three credit bureaus—Experian, Equifax and TransUnion.
Then, look at what your report says. Are there negative marks due to consistent late payments? Are any of your debts in collections? Figuring out why you have a low credit score is the first step to changing it. If you see any mistakes like Horrell did, contact the lender as soon as possible.
Your on-time payment record makes up 35% of your credit score. Making payments by the due date will gradually increase your score over time. If you struggle with this, set up autopay for all your credit cards, bills and loans and create a calendar reminder to double check that the payment has gone through.
Just a few months of on-time payments can significantly increase your score. As long as you pay the minimum by the due date, your payment will be reported positively.
Avoid opening new forms of credit if you already have a credit card or a loan. New inquiries stay on your credit report for two years and each new form of credit lowers your average credit age as well as your score.
Find the root cause
Sometimes a person has a bad credit score because they’ve never had to take out loans, and always pay in cash or with a debit card. However, a poor credit history can also signal a consumer who’s irresponsible with money.
If your partner has a low credit score because of their own choices, you have to find out why. Did they run up too much credit card debt during a period of unemployment? Did they cosign on a loan for a family member and end up responsible for the entire balance? Or do they simply have a spending problem?
When talking to your partner, try to be respectful of their financial situation. Discussing these issues can be embarrassing, so be supportive. They may have grown up in a home that didn’t discuss financial literacy or in a family where debt was common. It may be awkward for them to explain why they don’t have a better grasp on personal finance.
Consider going to a couples counselor if discussing financial issues always ends in a fight. A professional third-party can help you decipher what you’re really arguing about. Are you upset that your partner struggles to keep their spending in check? Do you feel like they don’t understand why saving for retirement is so important? Paying for a few sessions now can help you avoid bigger problems later on.
Unlike combining your finances, credit stays separate even after you get married. With that being said, your credit score still affects your partner, especially if you want to apply for a mortgage.