By Tom Quinn
Congratulations! You survived the big wedding day, hopefully enjoyed a blissful honeymoon and are now getting settled into married life. Successful marriages require a lot of effort on the part of both parties and the management of finances should be an important area of focus. As troubled financial issues are one of the leading causes of divorce, it is surprising how many newlyweds don’t engage in open discussions regarding money, assets and credit.
Most experts agree that creating a budget, agreeing on investment strategies and allocating responsibility for who pays what bills should take place early on in the relationship and be revisited on a periodic basis. This is sometimes a difficult conversation in today’s world given most people entering marriage have been financially independent for a number of years and are used to making these decisions on their own.
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As a couple, you will likely be making many credit-related decisions in the near future — such as purchasing a home or automobile — and the following tips can help you be more informed as it pertains to credit.
Know where you stand. Both of you should obtain a copy of your credit bureau report to ensure the information contained on you is accurate and up to date. You can do this for no charge at www.annualcreditreport.com. Follow the dispute resolution instructions if you find errors so they can be investigated and resolved as soon as possible.
If you have a healthy competitive relationship – order your credit scores to see who has the highest score and work together to improve each other’s credit scores if they are lower than desired. For example, paying off high interest credit card debt one spouse may be carrying helps you save money over the long run as well as add points to the score.
Create a schedule to periodically check your credit report in the future so you can be sure it is accurate before you apply for credit.
Don’t cancel or close down any of your preexisting credit. Your credit file is created, stored and updated at the individual level – even when you are married. It is likely you have credit in your name that was opened before you got married – don’t cancel or close these down as it could hurt your score and leaving it as is will likely have no negative impact. In addition, it is a good strategy to maintain some level of credit in your own name in the event you end up divorcing or your spouse passes away. This is especially true if you plan for one of you to eventually be a stay-at-home parent (when it will be harder to get approved for new credit).
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With your credit cards, you can always add your spouse as an authorised user versus opening up a joint account. Remember, once you do this that credit card account will be reported on both credit reports.
Only apply for credit when needed. Many newly married couples are excited about starting their new home together and go a bit crazy buying new items (furniture, kitchen supplies, curtains, etc.). It may be tempting to open new store credit each time to get the “15% discount” – but a sudden ramp up of newly opened credit can have a negative impact on your score and could cause your cost of credit to increase as some lenders (in the car loan area for example) often set interest rates higher when credit scores are in the lower tiers.
Ensure the bills are paid on time. In the beginning, over communicate to ensure the designated spouse is paying the assigned bills on time. Late payments can have a very big impact on credit scores.
Following these easy steps can help you manage your credit more effectively which will increase your access to wider range of lower cost credit – and reduce the stress often associated with managing a lower credit quality profile.