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Credit and debt history can impact relationships. Find out how your partner’s credit affects you and what can be done to limit possible damage to your score.
When you experience that exhilarating feeling of falling in love and the person you’re dating checks every box, it can be easy to miss a few red flags. One of those is their credit history.
But, if the relationship is (becoming) serious, and you’re thinking about getting engaged, moving in together or combining financial responsibilities in any way, you’ll want to have open and frank conversations about personal finances with your partner early on. Heck, even if you’re past these stages, it’s always good to check in and have these conversations.
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Money is often one of the biggest sources of conflict for couples. That’s why being open and honest with your partner is so important—including talking about credit scores. Knowing your partner’s credit score gives you some insight into their financial behaviours. Have their bills gone unpaid? Are their credit cards close to their limits? Does your partner have any personal loans?
Understanding your partner’s financial debt and how to rebuild credit can help create a solid financial foundation for your future together. Here are some considerations to keep in mind when it comes to couples and credit.
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Your financial decisions impact your credit score, as well as that of your partner. Your credit score indicates creditworthiness for lenders, meaning it influences the loans you may qualify for, the interest rate you’ll pay, what you can buy on credit, and maybe even where you work and where you live.
If one partner has had credit red flags, the good news is that won’t affect the other partner’s credit report or credit score. Credit scores are linked to personal information, including your Social Insurance Number, so your credit history remains separate from that of your partner, even after getting married.
That said, there are scenarios where your partner’s credit score can impact you. Here are four:
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If your partner’s credit score isn’t where either of you would like it to be, you can work on it together. Here are five steps you both can take to get to a point of healthy credit and prevent debt.
Make sure to hold each other accountable. It’s not money itself that ruins relationships, but the lack of communication and transparency on mutual expectations around money that does. Financial incompatibility is one of the leading causes of divorce, so get to know each other’s scores before making any major financial decisions together.
While your partner’s credit score won’t directly impact your credit score, joint accounts or adding the other as a co-applicant will. The one exception is adding your partner as an authorized user to your credit cards and banking accounts.
When added as an authorized user, your partner is able to use the credit card but cannot make any changes to the account. Their credit will also not be impacted in any way. However, when a partner is added as a co-applicant, they have to go through the required credit checks and both partners’ credit is impacted based on usage of the account.
Joint accounts can be beneficial when both partners are on the same page with money. For example, a joint account can give you access to a larger borrowing limit. It also can simplify your finances and foster feelings of partnership. However, depending on your partner’s money habits, sharing a joint credit card could be a real risk to your money and your credit score.
If either of you miss a payment on a joint account or run up a large balance, each of your credit scores can take a hit. On the other hand, if you and your partner always make your payments on time, both of you will see improvement in your credit scores as the joint account will show up on both of your credit reports.
Getting extra credit through a joint credit card might seem like a good idea, be sure to assess each of your financial situations before doing so as gaining new credit can influence financial behaviours. Be critical about how having more or less credit affects your ability to live within your means and pay off your debt in full each month. If you or your partner have any debt, the focus should be on paying it down. Only consider a new, joint credit card if you have paid off your individual debts first.
Before combining finances in any way, such as joint credit cards or loans, it is imperative that you and your partner are in agreement and have the same expectations. To maintain healthy credit and prevent debt, consider the following five things:
Discussions about finances aren’t always easy. They might cause stress, tension and arguments with your partner. But, the more you practice communicating with honesty and intention, it does become easier.
None of this is to say your partner having a sub-par credit score should be a deal breaker. In fact, it’s fairly simple to start rebuilding credit. As professionally certified credit counsellors with Credit Canada, we often help couples understand their credit and address debt. If you need additional support, contact us today to book a free credit-building counselling session.
This is an unpaid article that contains useful and relevant information. It was written by a content partner based on its expertise and edited by MoneySense.
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