CREDIT CARD HELP: The basic fundamentals of credit cards

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Getting married? Don't say 'I do' to bad credit

Communication about finances before the wedding is key

By Adrienne Gibbs

With financial squabbles topping the list of reasons why couples seek divorce, experts say it makes sense to check out your partner's creditworthiness before you get married. 

New couples heading to the altar happily "deal with social and sexual issues and yet the financial issues are the ones more likely to cause a divorce than anything else," says Mike Sullivan, a personal finance consultant and former director of education for Take Charge America, a Phoenix-based, nonprofit financial education and consumer debt service organization.

So, before you say, "I do," you should become more intimately acquainted with each other's financial outlook and overall health, and nothing says it better than your credit report. (See "12 debt questions to ask your betrothed.")  

About 20 percent of couples report having disparate attitudes toward money issuers, according to a survey done by Ameriprise Financial. And 3 percent of couples said they don’t agree financially at all, and those couples are more likely to set different spending limits and fail to communicate about purchases, the survey found.

How does a couple get off to a good financial start?
First and foremost, a couple must communicate about finances before, after and during the wedding, Sullivan said.

When discussing finances, there are a few key discussion topics and steps couples can take to find out if they’re a financial match made in heaven.

1. Review the credit basics.
Among the things you need to find out are your intended's credit score, credit history, spending habits, debts and assets, say experts.

"The credit report reflects how a person manages money,” Sullivan said. “If their credit report is a lot different from yours, it probably means you have a lot of financial compatibility issues."

It also helps to know and discuss your beloved's guilty spending pleasures, such as a new $500 Coach purse every season or a new $80 Xbox game every week. Can your new spouse forgo these expenses in a pinch or are these items not negotiable?

The most important questions: "What's your credit score and do you know your credit score?" said Glass. "Just have those discussions and once both people know what's on there, you can work to improve it."

2.   Outline long-term financial goals.
Additionally, financial planners say a soon-to-be-wed couple should plot out their collective financial goals --whether it's buying house, having kids, taking annual European vacations or saving for matching Harley Davidson motorcycles in retirement. Doing so can help pave the way toward smoothing out any credit-related kinks that might bankrupt these dreams, said Mechel Glass, former director of education and a credit counselor with Clearpoint Credit Counseling Solutions in Atlanta.

If your partner gets a bit squirmy, Glass suggests being the first one to break the ice.

"They can just say, "I'm showing you the things on my [credit] report, so let's look at yours and talk about how we can work together to get the things we dream about for our family in the future,'" said Glass, who taught an online financial education primer for newlyweds.

3.   Pay down debt burdens.
If there’s a large amount of debt bringing down your partner’s credit score, the only thing they should do for the next several years is pay it down, Sullivan said, which could severely impact your life together.

“When you look at that credit report, you should add up the unsecured debt amount and if that amount is more than a person earns in a year, then it’s time to suggest that you date around,” Sullivan said.

This is important now more than ever because of the increasing amounts of student loan debt that college graduates carry, Sullivan said.

4.   Evaluate the situation before racing to the altar.
If a couple’s scores are widely different, then they have work to do, Glass said. This could be a great opportunity for the "good credit" partner to educate the “bad credit” partner why it's important to pay off bills, not carry a balance and to be timely with payments, she said.

"If one person has a horrible credit score and the other has pristine credit, you probably want to keep those separate and work with the other person to correct the things they're challenged with," adds Glass. The best scenario, however, is to take the time to build up each other's credit before you tie your financial future together, experts advise.

HOW TO BOOST YOUR PARTNER'S CREDIT SCORE
  • Open a joint credit card or transfer their debt to your lower interest rate card.
  • Review how credit histories and credit scores will impact your life together.
  • Set up a budget and pay bills on time.
  • Create financial goals for 5, 10 and 20 years from now.
  • Set a time frame to pay off debts, then check your credit scores regularly to track progress.
  • Ask your partner if you can take over all bill-paying responsibilities.
  • Communicate about money matters often and thoroughly.

Avoid learning the hard way
Looking back, Melanie Davis wishes she and her husband had paid off his credit card debt and worked on his credit score prior to getting married. But before they were married, it didn't seem like a huge deal.

At the time, she scored in the low 800s. His credit score? Very low, she said. 

"I knew he had bad credit going into it and looking back now I really wish we had resolved that before we got married," said Davis, 35, of Birmingham, Ala. "We didn't attempt to try to do anything to fix it ... His credit card debt was over $10,000. I knew that it was not even worth us even attempting to put him on the credit application" for their new home, she said.

Although the newlyweds got their house, Davis had to apply for the loan by herself and added her husband to the deed only after the closing. They had talked extensively about their finances during their engagement, but didn't make moves to fix anything until after the nuptials.

Now, Davis, who is a manager with the Birmingham Regional Chamber of Commerce, recommends that all couples have a serious credit conversation and pay off all major debts before marrying.

In Davis's situation, taking control of her partner's debt also sped up the process. For example, Davis applied for a low-interest credit card from her credit union and transferred her husband's debt over to that card. Happy with the much lower interest rate, they worked together to pay off that debt in just six months. That method worked better than just hoping he'd pay off the debt by himself, she said.

The Davis' solution was feasible because the couple communicated openly and tackled the problem together, two moves Sullivan believes more couples should make.

Who should be in charge of the finances?
So, how do you improve one person's credit while keeping yours clean? Couples could consider opening up a joint account so that the one with the lowest credit score might benefit from being joined with the one who has a high credit score. Care must be taken if such accounts are created, Sullivan said.

"You can help somebody improve their credit if you want to by lending them some of your creditworthiness," Sullivan said. "Or you can pay their bills for them. If you're going to protect your own credit, you've got to decide who's most responsible. Whoever has the highest credit score pays the bills and controls the money."

Couples should remember that nearly everything they need to build a financial life together is tied to a credit score and credit history, including necessities such as insurance, turning on a new electricity service, ordering cable and financing a home. While marriage alone doesn't mingle two credit scores, they do get mingled once a joint account is opened, a credit application is co-signed or a person is added as a joint account holder or authorized user to an existing line of credit.

Once your credit is tied to another, separating the two becomes nearly impossible (although authorized users can be removed from a card account painlessly) and it is extremely important that both partners work together to keep their credit scores high. If the phone bill is in the woman's name and the man is responsible for paying it, but he pays late, there could be problems, Jerome Tellis, a Florida-based financial adviser formerly with MetLife said.

MetLife doesn't use credit scores to help underwrite insurance policies, but the company does look at credit histories, Tellis said. That includes all those boring bills.

"There is a direct correlation between a person's credit history as well as their claims history," Tellis said. "If their credit history is not more favorable, they tend to file more insurance claims. Credit history is only one of the many factors that go into the underwriting process for insurance."

Tellis suggests that couples ask their agent to use the more favorable credit history when applying for coverage. He also says couples should check each other's credit history for bankruptcy, unpaid student loans and foreclosures -- as they all can impact favorable treatment.

Start talking ASAP
Soon-to-be-wed couples should consider all these issues up front, so the marriage will have a much better chance for success. Just ask Davis, who occasionally thinks about the money she spent to repay debts that weren't technically hers.

Looking back, she suggests that couples consider postponing marriage until debt and credit issues are resolved. That way, she says, the honeymoon is sweeter.

"Finances to me are the biggest root of a problem for marriage," Davis said. "If you don't have your finances in order before you get to the wedding, you'll be fighting about it. I promise you will."

With financial squabbles topping the list of reasons why couples seek divorce, experts say it makes sense to check out your partner's creditworthiness before you get married.

See related: Authorized user or joint account holder?, Can a prenup or postnup save you from a spouse's debt?

CREDIT CARD HELP: The basic fundamentals of credit cards

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Updated: 10-20-2017



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