Should you know your partners credit score?
Unfortunately, in today’s society, the subject of personal finances (even with a spouse) is an uneasy one to discuss. A recent American study reported that married couples were very closed off with one another when it came to sharing their personal finances. 15% of the couples interviewed said they had hidden purchases from their spouse, whilst more than 10% had a bank account or credit card their partner wasn’t aware.
Opening up about your financial situation and credit score can be scary, but the benefits of doing so make it worthwhile. Here are three reasons why you should want to know each other’s credit rating.
1. Saving money on a mortgage
Married couples will, at some point, look to purchase a home together to start their family. To purchase a property you will likely need to take out a mortgage. A mortgage provider will use an applicant’s credit score to determine the interest rate. In the case of a joint application, the lowest credit score of the couple is the score that will determine the rate offered.
If your other half has a poor credit rating, you could potentially save a large sum of money in interest payments by applying for the mortgage in your name only. This is because the interest rate the lender may offer will be lower than if it were a joint application as the credit score will be higher.
2. Rejection for credit
If you jointly apply for a line of credit and your partner has a poor credit rating, it could result in a declined application that will show up on your personal credit report. Understanding your partner’s financial situation is critical to deciding not only the best option for credit but also the best way to apply. If you both have bad credit ratings then it may be worth considering an asset-based (secured) loan where your credit scores play a less significant part in the decision process of the provider.
3. A helping hand
It could be that you and your partner are complete opposites with managing personal finances. If you are notoriously bad with money and have a poor credit rating yet your partner is very capable at managing money; they could provide you with the support and guidance to help get you back on track.
Your partner could support you in building a monthly budget to stick to. They could also review your spending to identify and remove bad habits you may have. If you have joint bills that are managed by your partner, you might put these in your name and ask the provider to report the successful payment to the credit bureaus. This will help improve your personal credit rating if the bills are paid on time on each month.
Finally, having a financially diligent partner review your credit report can help you identify outstanding payments that are having a detrimental effect on your credit. Your credit report will show all your outstanding bills and payments throughout the history of your financial life. Going through this carefully may highlight payments that have been outstanding for a while. If you are able to repay these it will positively affect your credit rating in the long run.
In short, being honest with one another about your money and financial situation can help you not only help get you better rates and save money over time, it will prevent any unwanted surprises coming your way.