When it comes to your credit score, most people are quite rightly concerned at where their score sits and what they can do to boost it. But did you realise that your partner’s credit score also affects you?
Many people are trapped in the mistaken belief that if they handle their finances separately to that of their partner, they will be unaffected by their partner’s score. While this may be the case for the short-term, down the track as you set up your life together, a low credit score will make things much harder.
What is a credit score?
Your credit score can be a little hard to understand, as there are a number of different factors that affect it, but essentially it is a number that is based on your credit history. This score is used by credit providers to determine whether you are worth taking a financial risk on, how much they are willing to lend you, and the terms of the loan.
Everyone has their own credit score, which means when you choose to spend your life with someone, their credit score is likely to affect you and your ability to take out a loan as a couple.
What happens if I marry someone with a low credit score?
This may not be the first thing you ask yourself when it comes to marriage, but it is something will come up as you begin your life together.
It’s important to note that marrying someone with a bad credit score, does not affect yours at all. Even after you marry, both you and your partner will continue to have separate credit scores. But this can still affect you in many different areas of your life together.
What does it mean for me?
While you have made every effort to maintain an excellent credit score for yourself, once you get married and decide to create a life together with someone you love, your finances will undoubtedly cross paths through major life decisions.
If your partner has a bad credit score, here are just some of the ways it may affect you both:
- You may be unable to take out a joint tenancy on a property.
- You are unable to put both of your names on household bills, such as utilities, making you solely responsible for them.
- You will be refused a personal loan application.
- You will be refused a mortgage borrowing, affecting your chances at being able to purchase a house.
Basically, trying to take out a joint loan together will be hard, as your partner will be deemed as a risk, even if your own credit score is high.
What can be done?
There are a number of things that may have affected your partner’s credit score:
- Unpaid or overdue loans
- A high number of credit enquiries
- A large amount of credit borrowed
The first thing to do is to sit down and have a conversation with your partner. Ask them about their credit history and why it is so bad. Just because they have some debt to their name, doesn’t make them a bad person. Everyone comes from different circumstances, so it is worth understanding your partner’s.
Here are some questions to ask:
Do you have any debt?
All you should be looking for here is a yes or no answer.
How much and what type of debt?
Perhaps they have a student loan debt they are in the process of paying off. They may have had a medical emergency and be working on a personal loan. There are so many different types of debt and so many different reasons for taking out a loan so now is your opportunity to find out more.
How do you feel moving forward?
This question is about their attitude towards money. Are they looking at paying off this loan in the near future? Or do they seem to be a bit reckless with their spending and are looking at racking up a larger debt? This is the stage you need to get on the same page to make sure you have a plan moving forward.
Repairing credit together
The best part about being in a couple is that you can work together to fix this issue. The obvious place to start is by paying off any outstanding debts. Steer clear of making any new hard inquiries during this time, as this will also affect the credit score. Build it up again before you consider taking out another loan or asking about one.
You always have an opportunity to turn it all around. It starts by laying the groundwork and making sure you are both on the same page when it comes to moving forward and getting things back on track.