When you're married, you share your life, love and finances. Before you get married, consider discussing not only what you have in your bank accounts but also your credit scores. Poor credit reports from one or both spouses could ruin your chances of starting your married life in your dream house or buying furniture together with a new credit card. While you two have individual credit scores, if both of your names end up on an application for a mortgage or other application for credit, your scores may be factored together. In addition to finding out if they will qualify for mortgages and credit cards, married couples may need to share information about finances to find out if they want to create joint bank accounts.
A little more than one-third of Americans believe they should talk about their finances with each other in the first five months of dating, while the vast majority (60 percent) said they should wait until the six-month point or later before sharing, according to a recent survey by Lexington Law. Talking about your spending habits early could help couples build the foundation for not only a happy marriage, but a debt-free one as well.
Uncover Any Hidden Debts
When you're starting a new life with your spouse, heavy debts could weigh you both down from achieving what you want to do. From student loans to auto loan payments and more, consider asking each other about the types of debts you may both have. By getting all the information about debt out in the open, you can both develop a financial plan to tackle this debt and eventually live your life together without the burden of debt. You could also avoid the frustration of having to tell your spouse about any unexpected debts after you are married.
After finding out about your existing debts, you should be careful about co-signing on any future credit obligations. You should make sure your wife or husband-to-be is responsible with funds, can make payments on time and avoid overspending before signing on that dotted line. If one spouse has poor spending habits, it could be hard to escape debt during marriage – and even if you two decide to divorce – once debt collectors start calling.
Factor in Both Credit Scores
When you apply for a loan, such as a mortgage, your future interest rates and limit for borrowing could be determined by you and your spouse's credit scores. For example, a lender may check both of your scores when you submit an application for a mortgage. A spouse with a lower credit score could result in higher interest rates as well as a lower budget for buying a home compared to if you both had good scores. Even worse, your application may be rejected if lenders find one or both spouses a risk.
Determine Whether to Sign Up for Joint Bank Accounts and Cards
To make it easier to spend money, couples often decide to take the plunge and apply for a credit card together. Having one card between both of you could help you keep track of your credit card balances and making payments together. The problem with sharing a credit card, however, is joint accounts will impact your two credit scores. Depending on how you use the card and the balance compared to the credit limit – reported as credit card utilization rate to credit bureaus – bad spending habits could sink your scores.
With you and your spouse sharing credit information openly, you are one step closer into building a happy and financially healthy marriage.