Admittedly, a lot of people are confused about their credit score. Even as experts explain how important it is to have a good one, they continue to be baffled by a lot of concepts about this number. You cannot leave it in that situation because failure to clarify things can cost you.
In most cases, we understand what a credit rating is and how it is computed. We know that it involves our payment history, amount of debt, credit age, new accounts and type of accounts. We also know that it needs to be high. However, the one area that confuses us is the effects of a good or bad credit score in our life in general. There are so many misconceptions about it and you need to know which is which.
5 credit score myths that married couples have
Among the credit score myths, there are plenty that revolve around its effect on one’s marriage. A lot of people have varying ideas about how credit scores affect their relationships. To help clear things up for you, here are 5 popular misconceptions about credit scores.
Myth 1: You merge your credit score with your spouse.
If you think that after saying “I do,” the three major credit bureaus will combine your reports – that is where you are mistaken. You will be combining your finances but that will up to the extent that you will agree on. And regardless if you have a joint account or purchases, that does not mean you will have one credit score. Your scores will continue to be separate but any joint accounts that you have from hereon can affect that.
Myth 2: Your spouse’s past credit can affect your own.
If the bad financial behavior of your spouse is evident in an old debt account, then you do not have to worry about that. It cannot affect your own credit. According to Experian.com only a joint account can affect your credit score – because it is already shared with your name. As long as you keep it separate, the past financial behavior of your spouse should not be a threat to you. But if you start to take on debt together, then they would be a problem in case your spouse fails to pay it back. That means you need to be careful of joint accounts and debts. It is common to have the joint arrangement but you need to monitor just how much the two of you can really afford. If it is beyond what you can have, then make sure that you discuss it amongst yourselves before you commit.
The only time that a debt will also be your responsibility is when you live in a community property state. These are the places wherein all debts and assets acquired during the marriage will be the responsibility of the couple – regardless if they had something to do with the debt or not.
Myth 3: Making your spouse an authorized user of your card will make them responsible for the debt.
It may seem logical that everyone using your credit card should be held accountable for the debt they will incur on it. That is not entirely true. If you are the principal cardholder and you give your spouse authority to use the card for purchases, paying it off will be your sole responsibility. It is not like co-signing loans. Be careful about any credit cards that you will give your spouse that is under your name. This is when their bad behavior will directly affect your own credit score. In case you want to remove them as the user, you simply have to call the creditor and have it removed. Again, you need to take into consideration the community property law. If you live in one, then you should know that they will be responsible for the debt even if they are only authorized users.
Myth 4: Divorce will erase the bad effects of your spouse’s credit behavior.
No matter what the court might say, any debt that involves both of your names will continue to be your responsibility until it is paid off. An article from MSN.com mentioned that divorce itself will not have a direct effect on your credit report. However, any bad behavior that you may have towards debts that you owe jointly can affect it. For instance, let us assume that the court rules that you and your ex should split paying off the debt. Even if you live up to your end of the bargain, the inability of your ex to pay their share will affect your score.
Myth 5: You cannot get new credit because of your spouse’s bad record.
This is not true as long as your credit score is good and you are applying only for yourself. If you are applying jointly, then that is a different case. The bad credit score of your spouse can affect the application. But if you do not have to put both of your names down, then new credit should not be a problem for you.
It helps to educate yourself about the real effects of your credit score in your marriage so you can make smarter choices about your finances. Take note that while the financial behavior of your spouse is important in your relationship, it does not have to be the cause of your demise. Of course, you need to make sure that both of you are willing to work hard to protect your marriage from the devastating effects of a credit problem.
How to protect your credit report from your spouse’s bad credit behavior
It is true that we do not choose who we fall in love with and that money will not be something that we are concerned about during the first few months of the relationship. But the reality is, you need to take time to get to know them on a financial level because it can affect your future together.
In a study done and published on Credit.com, it is revealed that credit compatibility can help predict if a marriage will be successful or not. The survey done by the website indicated that 51% of married couples have the same credit score as their spouse. Only 26% of divorced couples have the same situation, the rest can be assumed does not have the same credit score.
It is important to know that those who are still married made it a habit to manage their money together. Only 34% of divorced couples admitted that they did the same when they were still married to their ex.
The bottom line is, you could get hurt by a bad credit score so make sure that if you have a good one and your spouse does not, you need to help them correct it. This is one of the joint efforts that you have to do in order to save your finances and your marriage too.
Here are tips on how you can deal with bad credit scores in your relationship.
- Make a commitment to improve your spouse’s credit report. Make sure that this is something that both of you are willing to go through.
- Delay joint purchases for now. This is for your own protection. You want to correct the bad habits of your spouse before you make joint purchases. If you need to buy stuff, it might be a good idea to make individual purchases for now.
- Promise to be honest with your credit. It takes more for the spouse with the bad credit o make this promise but you need to keep the trust intact. Financial infidelity can also destroy your marriage because it can ruin the trust between you. Do not let this happen in your marriage.
- Do not co-sign a loan. Even if you love your spouse, try not to co-sign loans for them. This is never a good idea even if you are married to them.
Tackling debt as a couple can help strengthen your relationship. This is the only way that you can protect your marriage from being destroyed by irresponsible financial behavior. Be supportive of your spouse and try not to be too demeaning about it. Their gain is also your own so do not put them down because of past mistakes.
Diana hates debt just as much as you do. She is a finance writer for National Debt Relief. She aims to provide the best information to win the battle against debt.