Differing credit scores can cause disputes in a relationship. Learn how to bridge the gap and keep the love, and credit scores, strong.
Personal finances are rarely discussed but often the biggest strain on a couple. Even in early courtship, a newly dating couple may fret over who will pay for dinner, or have different tastes in entertainment based on affordability. Topics such as careers, hobbies and interests can easily spill into money talk. Money is just as important as other relationship issues such as family and personal interests.
Whether you’re spending your Valentine’s Day with a long-term partner or having a first date, a conversation about credit scores can provide valuable insight to be considered for relationship planning. Credit scores are always assigned to an individual, never a couple. But joint accounts can have an effect on those individual credit scores.
Credit Score Disparities Can Predict Future Relationship Problems
According to a report by the Federal Reserve, couples with similar credit scores are more likely to stay together, while those with a larger disparity are more likely to separate. Differing spending habits, opposing views on debt and other financial problems can cause stress on the relationship that those with similar credit scores are less likely to experience.
Examples of difficulties these couples may face could include:
- Lingering debt from the past
- Poor spending habits
- Disparities in household financial contributions
- Difficulty obtaining a mortgage or other important loan together
- Hiding or avoiding spending, debt or other financial issues
- Bills and expenses
- General financial stress
Of course, we aren’t suggesting to dump your partner at the slightest score difference. But it’s important to communicate with each other about personal finance and plan appropriately. If a partner has a low credit score (or no credit), what steps can be taken to improve the score for the long-term? Relationships are about working together, and a partner with a higher score may be able to provide advice and suggestions to a partner with a lower score.
It Takes Trust, but a Low Score Isn’t the End
If there is a large disparity in credit scores, both partners should evaluate whether they are prepared and willing to provide the support, communication and shared responsibility required to fix the credit problem.
Committed couples can move forward with confidence by working together to build both of their credit scores. Two quick strategies for building credit include:
- Having the partner with the higher credit score add the partner with the lower credit score as an authorized user on a credit card (this method requires a lot of trust!) Remember: married couples do not share a credit score, but behavior in joint accounts can affect both partners’ scores.
- Using a secured credit card to build credit
If one or both partners have debt, they should work together to develop a spending plan that leaves additional income to pay off the debt. For those in debt, paying off the debt is the best way to improve a credit score.
If one or both partners are struggling in their career, they can come up with a plan to support each other while working towards more prosperous career goals. Couples can turn a weak credit score into a strength by using it to incorporate accountability, good habits and stronger trust into their relationship.
Conversation is Key
Overall, couples need to communicate about money to maintain a successful relationship. Just like with personal finance issues, avoiding the matter doesn’t solve problems or build wealth. Couples should discuss:
- Existing debt
- Joint accounts
- Credit accounts
- Spending habits (both good and bad)
- Major purchases
- Bills and household expenses
This will lead couples toward better financial planning and spending habits as they move forward.
Couples can start with small discussions in early stages, and then move on to larger discussions later. For example, a couple in the beginning stages of a relationship could discuss the cost of dinner, or compare the costs separate of phone, cable or utility bills. They may talk about debt or salary, but not go into the specifics or the numbers. Couples in more committed stages can begin more difficult conversations about existing debt, bank accounts and long-term planning.
If a partner is unwilling to discuss finances, or quiet on the subject , the other partner can start small by mentioning their own personal finances and asking for thoughts and opinions.
At times, there will be misunderstandings and frustrations. Remember that no two people share the same financial education. Financial knowledge that may seem simple and obvious to one partner may be an entirely new concept to the other. Use money talk as a learning opportunity and a habit to build on stronger communication skills.
Everyone has different financial paths. When two paths join, they decide where to go next, together…
How do you approach finances in a relationship? Let us know in the comments below!