Erica Sandberg is a prominent personal finance authority and author of “Expecting Money: The Essential Financial Plan for New and Growing Families.” She writes “Opening Credits,” a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com.
Dear Opening Credits,
My fiance has excellent credit. However, my credit is poor to fair. I’m afraid that my credit will affect his negatively and want to avoid that at all cost. Please advise if we should refrain from joint accounts and tell us anything we should do or not do to protect his credit. Thanks! — KC
An all-too-common misperception about marriage and money is that the moment you tie the knot, your duel credit histories are instantly merged into one. Wrong! Unless you live in a state with community property laws on the books (in which case assets and liabilities are more mixed), you can remain individuals as long as you keep yourselves financially separate. (For more on community property, see CreditCards.com’s article, “8 things cardholders should know about community property laws,” which includes a list of the community property states.)
Now this doesn’t mean that you don’t have other economic matters that need to be cleared up before you walk down the aisle. Clearly, you do. Your credit mishaps have a back story, which you will need to rewrite so you don’t jeopardize your relationship.
Here is my five-step action plan:
1. ‘Fess up. Does your fiance know about the root and reality of your financial issues? Well, he better. Have a candid discussion about what led you to where you are at this moment. You do not want to continue to make the same mistakes, and you certainly should not hide anything about your financial affairs. Are you a compulsive shopper? Have a hard time managing money? Tend to avoid problems until they get out of control? Whatever the case, he deserves to know.
2. Share your credit reports. Anyone who is serious about getting married ought to get their credit reports and review them together. This way neither of you can hide from the black-and-white truth. Doing so is also a testament to your commitment to transparency.
3. Keep separate accounts. Many people will disagree with me, but I don’t think that joint credit and checking accounts are a necessity just because you get married. You’re still an individual, and if you’ve yet to master the art of borrowing, don’t sacrifice him until you’re equipped with the skills to do it right. Even then, there is nothing wrong with maintaining autonomy as long as you are both open about your banking business.
4. Elevate your score. Eventually the two of you may want to finance the purchase of a car or home. If you will be using both incomes to qualify for the loans, you’ll have to have a good credit score to get the best terms. Right now, that means a FICO score of 720 or above. To get there, delete credit card debt so it’s well below the charging limit, pay off any recent collection accounts (or if they’re about to drop off the report, you may choose to let them be), and make your credit card and loan payments on time from this point forward. It’s not so hard, really.
5. Host regular money meetings. In some way, you’ve got to incorporate positive, calm dialogue about money into your daily life. Questions and statements such as, “Honey, did you pay the Visa bill?,” “Let’s go over our budget this month. I think we overspent on groceries,” “Hey, I don’t recognize this charge; what’s it for?” “Let’s talk about saving for Cancun!” should all be part of normal conversation. If they aren’t and either of you is afraid to bring them up, you have more serious issues to contend with. At that point, consider financial or couples counseling.
And that’s basically it, KC. That you’re worried about harming your dear one in any way is very sweet, but you’ve got to take action to make sure that you don’t.
On that note, congratulations on your pending merger! May you both prosper — individually and as a couple.
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