Planning to move in with your significant other or tie the knot in the near future? There are many exciting discussions to be had, but money matters may not be one of them. In fact, it’s the dreaded topic many couples prefer to stay away from. But doing so can have serious implications for your finances and your credit.
Let’s take a closer look at how your significant other can send your credit to the trenches:
Careless Money Management
In some households, there is an appointed financial manager and the other relies on him or her to handle business. Unfortunately, they may not exercise sound financial management habits, leaving you to pick up the pieces and repair your credit after the damage is done.
Minimal Credit History
Kudos to your partner for avoiding debt, but it can become an issue when you’re ready to open a joint account, activate utilities or make a major purchase. Reasoning: minimal credit history equates to elevated risk in the eyes of lenders and increases interest rates and deposits or even worse, disqualification.
No cash on hand? No problem. Paying with a credit card will do the trick.
If this your partner’s mentality, beware of the damage that can be done to your credit score if it’s a joint credit card and the spending gets out of control. Not only will your credit utilization ratio take a hit, but you could fall behind on payments if the minimum payment becomes too much to handle. (Another thought: only paying the minimum will quickly land you in a mountain of debt).
This goes hand in hand with the last point. Whipping out the plastic each time you see a “must have” item is a recipe for disaster, especially if it’s a joint account and your partner is unaware of your actions.
Late payment fees aren’t the only thing you have to worry about when you miss due dates. Your credit score could also take a hit if the delinquency spans beyond 30 days and the creditor or service provider reports the delinquency to the credit bureaus. So if you share any accounts and the party responsible for remitting payment drops the ball, down goes your credit score.
Before taking the next step in your relationship, share money perspectives and credit reports with one another. Schedule an hour or so of your day for a meeting and cover the following:
- Who will pay the bills
- Debt-management practices
- Joint checking and savings accounts, and if they will help thwart irresponsible spending habits
- How to improve your credit score. (Visit AnnualCreditReport.com to retrieve a free copy of your credit report. Also, take a look at this article to learn more about the types of credit scoring models).
If there are major discrepancies and credit issues, devise a realistic plan of action to get over the hump. This may be painful, but will mitigate the problem before it gets out of hand and costs you your relationship.