Beginning a new life with your partner means many firsts are in your future. Part of the fun of being newlyweds is having shared plans, such as purchasing a family vehicle or a home. When you begin opening joint accounts or taking out loans, it is essential to know how issues involving your marriage and credit score work.
Educating yourselves as a couple about sound money management is a smart way to get on the right track. Here are things you need to know about credit practices that will benefit you for years.
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How Do Marriage and Credit Score Impact Each Other?
Tying the knot doesn’t automatically tie your personal credit histories together. This is crucial to understand, especially when one spouse has better credit than the other. Your individual credit information is reported to the three major credit bureaus: Equifax, Experian, and TransUnion. This is necessary for each person to have the opportunity to both build and repair credit.
Your credit score will never impact your spouse or vice versa if you don’t apply for shared loans or lines of credit. Realistically speaking, though, most married couples want joint accounts for fundamental reasons. For example, a couple who wants to buy a house likely wants both sets of names on the mortgage and the deed.
On a joint account, the information about payment history is reported on your individual credit reports. Both positive and negative information appears on each of your records.
What Are the Marriage and Credit Score Benefits When Trying To Improve Your Credit?
If one of you has less than stellar credit, opening a joint account is a great way to improve your credit score. Solid payment history is one of the best ways to increase your numbers over months and years. Additionally, if you both have a debt to pay down on individual accounts, you can tackle it much faster.
These are four important ways combining your efforts can quickly change your financial landscape:
- Pay off large balances first: Most creditors look at credit utilization to determine whether to provide you more credit. Reducing balances improves your credit score steadily.
- Eliminate collection accounts: Unpaid accounts jump out when your report is reviewed. Cleaning up your accounts as a team lifts the individual burdens and is a critical financial accomplishment you can continue cooperatively.
- Develop a credit history: Having no credit history can be as much of an issue as dealing with poor credit. As a couple, you can use joint credit to make your marriage and credit score goals happen.
- Provide each other with security: Individuals must have current and positive credit information. If a spouse passes away, personal credit history can be a lifesaver for the surviving partner and family.
If a partner needs to repair or build credit, making them an authorized user on an account in good standing is advantageous. However, make sure you stay within the limits of credit utilization. If it’s possible, pay off all credit card debt monthly.
This prevents trouble down the road and protects your hard-earned credit score. Use informational tools online to learn how to manage your credit wisely.
What Are the Risks of Joint Accounts?
One of the top issues with shared accounts is driving up debt too quickly. A spouse with good credit may have a high spending amount from years of paying well. As a new couple, money arguments can reach peak form over marriage and credit score problems. You could accrue balances so high that only minimum payments are manageable.
Unrestrained credit utilization might affect your ability to get loans. Worst of all, you may begin making consistent late payments or missing payments altogether. The additional fees alone could add thousands of dollars to the burgeoning debt.
While this may sound far-fetched to a person who has responsibly handled credit for years, it is a scenario that occurs all too often.
What Are Important Issues To Cover Before Opening a Joint Account?
Figuring out your money decisions is a surefire way to understand how well you communicate as a couple. It is essential to take a hard look at your finances before you make decisions about credit. It is better to preserve the creditworthiness of one spouse than to have negative information appear on two reports for seven years or more.
These are areas to discuss ahead of time, especially when considering revolving credit lines.
How Do You Intend To Use the Credit?
Before entering into a joint account with your spouse, discuss how you plan to use the credit and how you plan to pay it off. Think about what credit cards you need when contemplating marriage and credit score objectives.
Being clear about shared goals is the key to sensible spending habits. Taking a card just because a company offers one is not the best choice. Too many open lines of credit with large spending limits are negative marks on your overall credit score.
Who Handles the Bill Payments?
Plan for who will pay the bills each month. It is easy for busy couples to think the other person is taking care of payments. A few missed payments matter more than you may realize. Patterns, both positive and negative, are what stand out on credit reports.
How Often Will You Review Your Credit Goals As a Couple?
You are probably familiar with the slang phrase “couple goals.” Two useful financial couple goals are regularly reviewing and maintaining your individual and joint credit accounts. It helps all the other things you want in life to fall into place.
Find Helpful Information About Marriage and Credit Score Matters
Fiscal Tiger is on a mission to educate people about finances. Since many things couples need and want in life revolve around wise financial decisions, it’s necessary to get educated about credit. Good credit is the key to making your dreams a reality.
We have excellent resources about marriage and credit score issues that put you on the top of your financial game. We aim to empower you to become fiscal tigers, so you have what it takes to make smart money moves. Check out our credit resources today and make a difference in your lifetime!
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