How couples should, and should not, manage their credit scores
By John Ulzheimer
The Ulzheimer Group
Valentine’s Day 2016 has come and gone and, as romantic as it might have been, most of you probably didn’t devote the occasion to discussing management of your credit scores. I get it. We can’t all be equally passionate about credit scoring, and debt management isn’t the most likely candlelight discussion topic. However, as relationships progress beyond the “just dating” phase, credit scores should find their way onto your radar, and quickly.
Credit scores are calculated for each of us as individuals. There is no such thing as a couple’s credit score, so you and your significant other do not and cannot share scores. So if you default on your individual credit card account, your credit score—and only yours—will decline. Conversely, if your significant other defaults on their auto loan, it’s only going to be their problem.
But that doesn’t mean that couples’ finances—and relationships—cannot be harmed by a low credit score. That’s certainly the case if you and your beloved choose to apply for joint credit—an option that’s often advantageous, or even necessary for large loans such as mortgages. In a joint loan application, the lender takes into consideration both parties’ salaries, assets and other savings and, critically, both parties’ credit scores.
The biggest source of relationship stress typically occurs when the scores for each member of a couple differ widely. If you have a sterling record of timely payments and prudent credit usage, that will be reflected in a high credit score, and if your significant other has a checkered payment history or, worse, loan defaults or bankruptcy, his low credit score could offset yours—possibly leading to relatively high interest-rate charges or even rejection of your application.
At the very least, discussing credit histories—and scores—ahead of time can prevent unpleasant surprises based on such discrepancies.
If both members of a couple have high scores, there’s not much of an issue, as their joint applications typically will be rewarded with relatively low rates, but two low scores can be a source of difficulty as well.
The good news about credit scores—and the habits that determine them—is that they are not set in stone. If one—or both—members of a couple have low credit scores, they can bring them up over time by adopting good credit habits.
If you believe your significant other has credit management issues, it might be smart to maintain credit independence at the onset of your relationship, and avoid joint credit applications. Longer term, you might want to pursue credit counseling for you and your beloved. It may not be your idea of a dream date, but learning to establish and maintain good credit habits can lead to better credit scores, more advantageous lending terms and more stable financial—and emotional—relationships over the long haul.
It’s important to have “the talk” with your significant other before you travel too far down the road together. Credit management attitudes are no different than other money management attitudes and “money issues” are one of the most common causes of relationship stress. And while it’s not romantic, it is important.