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Three Credit Tips to Help You Achieve Marital Harmony

You’ve formally taken the plunge and entered the world of marital bliss. You’ve committed to each other “in sickness and in health” and “for richer or for poorer,” but one question is yet to be answered: what should you do about your credit?

I don’t pretend to have all the answers on how to best manage your credit as a couple, but I can give you some tips based on what has worked for my wife and me during our 18-year marriage.

Stay a Credit Bachelor(ette)

Decades ago it was commonplace for the man to work outside the home and the woman to raise children in the home. And if that’s your choice now, then more power to you. But my guess is that in today’s world more families have two working spouses. As such, you likely have dual incomes. This makes the need to co-sign or apply for credit jointly completely unnecessary.

Credit reports are maintained at the individual consumer level by the three nationally recognized credit reporting agencies; Equifax, Experian and TransUnion. That means you will always have your three credit reports and your new spouse will always have his or her three credit reports.

This is important because you don’t have to co-mingle liabilities just because you’ve gotten married. You can maintain credit independence as long as you like, which is not a bad idea. And just because you choose to not co-mingle liabilities it doesn’t mean you can’t help your spouse get a credit card by adding him or her as an authorized user on one of your existing cards.

If you do choose to apply jointly for credit the lender will pull both you and your spouse’s credit reports, and credit scores. In that scenario the lender will make their decision based on the aggregate of information. This gives the perception that you’ve got joint credit reports and joint credit scores but in reality they’re still mutually exclusive.

If your credit scores are considerably higher or lower than those belonging to your spouse applying jointly, it’s going to result in a higher interest rate. You cannot apply jointly and be immune from the downside of a co-applicant with a lower credit score. So, if you need two incomes to qualify for a loan, then the family will be paying more in interest. You can avoid this by avoiding co-applying for loans until both spouses have similarly strong credit scores.

As a family unit you’ll likely apply for three different types of credit: credit cards, car loans and a mortgage. Let’s address them one at a time.

You do not need two incomes to qualify for a credit card. So, applying for a credit card jointly is not a requirement. In fact, you can accomplish the same “plastic” efficiency by opening a card and adding your spouse as an authorized user, which gives you the same usage permissions and same credit building benefits, but none of the liability.

You don’t need to apply jointly for an auto loan. Qualifying for an auto loan or lease is not that difficult if you’ve got good credit and even a modest income. The exception to this rule is if your spouse has a very “thin” or limited credit report. In that case, adding him or her to the loan is not a bad way to help build their credit reports.

You will probably need to apply jointly for a mortgage loan. Unless you’re buying something very affordable or one of you makes a hefty income, you’ll both need to be on the loan documents. This isn’t that big of a deal, as installment debt isn’t nearly as damaging as revolving (credit card) debt. And, as with the auto loan scenario, having a mortgage on your credit reports isn’t a bad thing for your credit scores.

 

The primary reason you shouldn’t jointly apply for credit doesn’t have as much to do with marriage as it does with divorce. This theory of credit independence seems to polarize my readers. Because while nobody goes into a marriage expecting a divorce, reality is reality. I get very supportive or very critical comments to my “couples and credit “ suggestions. I understand the counterarguments, but with the divorce rate so high, it’s easier to divide credit obligations when there’s only one name on the account. When a marriage fails, liabilities have to be divided and assigned to one of the soon-to-be ex-spouses.That’s easier said than done because creditors do not recognize divorce agreements. That means if you have joint credit, both ex-spouses will still be liable regardless of what you agreed to during your divorce. That can become problematic because if payments are not made the late payments will show up on both ex-spouse’s credit reports.

Be Honest About Your Ex’s

Not your old boyfriends and girlfriends. I’m referring to your ex-credit obligations that might still be haunting you. Nothing is more infuriating than learning about defaulted credit obligations that pre-date your marriage.

I’ve got three very good friends who are now divorced and each of them attributes their divorce partially to old spousal debts that were never disclosed prior to getting married. One was a $90,000 student loan and the two others were massive amounts of credit card debt.  The “I had no idea I was marrying into this” conversation isn’t one you want to have, ever. It can’t end well and suggests that you can’t trust your spouse on credit and debt related issues. This sort of financial infidelity is marital cancer, which can only be cured by coming clean about your debt-related skeletons sooner rather than later. And by sooner, I mean before you get married.

Don’t Hide Credit Purchases

My wife and I have a policy about credit card purchases. If the purchase isn’t of the “normal” (groceries, gas, etc.) variety and it exceeds $100, then we will tell the other BEFORE making the purchase. We’re not asking for permission or an endorsement, but we are extending the courtesy of letting the other one know. And 99% of the time the other responds with “sounds good.” While it seems like a formality at this point, I know we both appreciate the “heads up.”

Put yourself in this situation and ask yourself: how would my spouse respond?  You go to the mall and buy $1,500 in suits at Ann Taylor for work, which is a completely reasonable purchase if your job requires business attire. Before you leave the mall, the credit card issuer calls your home and speaks with your spouse and asks him if he was aware that someone just spent $1,500 at Ann Taylor on the account. The answer is clearly “No, but I think I know who did and it’s fine.” Now imagine if you didn’t let your spouse know that you were making the purchase. How would he respond? Having the discussion beforehand makes this scenario, which actually happened to me, a great story to tell friends rather than the beginning of an argument. Which do you prefer?

“Hey, can I see your suits?  I bet they look great on you.”

Or…

“I just got a call from Discover. Did you really just drop 1,500 freaking dollars at Ann Taylor?”

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2 responses to “Three Credit Tips to Help You Achieve Marital Harmony”

  1. […] Three Credit Tips to Help You Achieve Marital Harmony — Achieve credit marital harmony by being open about your credit purchases. [Credit Sesame] ShareThis Written by Ashley Jacobs and published on Wise Bread. Read more articles from Wise Bread. […]

  2. […] Three Credit Tips to Help You Achieve Marital Harmony — Achieve credit marital harmony by being open about your credit purchases. [Credit Sesame] […]

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