Get to know his/her credit history before saying `I do'

Your Money

February 13, 2005|By EILEEN AMBROSE

IF PERSONAL ADS were pragmatic, you might see a pitch like this: Single female with 820 credit score seeks single male with 800+ score who enjoys moonlit walks on the beach.

But in matters of the heart, people are rarely practical. It's not unusual for financial opposites to attract, where someone with a good credit history marries a bad credit risk. Often these differences go undiscovered until the two try to buy a house and are denied a loan -- or at least one with favorable terms -- because of a partner's poor money management.

"Unfortunately, we don't always talk about financial issues. It's so unromantic," said Sheryl Garrett, a Kansas financial planner and author of Just Give Me The Answer$.

But romance can be quickly extinguished, too, if one partner's financial troubles spill over onto the other. David Diggs, a family lawyer in Baltimore, said money is the root of 80 percent of the divorces he handles.

The key to preventing money troubles from damaging a marriage is to talk about finances before walking down the aisle. Only after finding out that credit histories are incompatible can couples begin to take the necessary steps to improve one partner's weak record while preserving the other's good credit.

Broaching the topic of finances isn't always easy.

Some financial planners and divorce lawyers recommend that couples exchange credit reports and credit scores before marriage. A score is typically a three-digit number used to predict the likelihood that a consumer will default on bills. It affects whether or not credit is extended to a consumer and under what terms. Top scores are usually in the 800s.

Looking at credit reports annually is a good idea, anyway, to discover any inaccuracies that could negatively affect how creditors look at you, said Holly Hunter, a financial planner in Portsmouth, N.H.

The big three credit bureaus -- Experian (888-397-3742), Equifax (800-685-1111) and TransUnion (800-888-4213) -- sell credit reports. A new federal law will entitle consumers to one free credit report a year, a perk that has been available to Marylanders for years.

Granted, it's not romantic to study your significant other's credit history. "It's much more romantic than having a divorce two years later," said Ryan Sjoblad, a spokesman for myFICO.com, which sells the widely used FICO credit score.

"A lot of couples go into marriage having no idea of what baggage the other person is carrying with them," said Sjoblad, who jokes that scores someday might appear in personal ads.

But other financial experts say that requesting a credit report can put a partner on the defensive.

Instead, they recommend couples ease into the topic by discussing goals and how they can financially achieve them. Also, couples can attend financial seminars and classes together, or both can read and discuss the same financial book. Garrett recommends Ruth Hayden's For Richer, Not Poorer -- The Money Book for Couples.

What if one of you has a good financial track record and the other's is wanting?

State laws vary on the financial obligations of married partners and on the division of property and debts in divorce. Couples with serious financial differences should seek the help of a professional. But here are some general guidelines for dealing with mismatched credit histories:

Keeping separate accounts. At least initially, maintain separate bank and charge accounts, and work on building up the spouse's weak credit record, advised Barry J. Dalnekoff, an Annapolis lawyer and chair of the family law section of the Maryland State Bar Association.

"If the husband had a bad credit history and he was significantly in debt to the point that creditors were threatening collection, they couldn't touch the wife's accounts," he said.

Another reason to keep accounts separate is to prevent one spouse's weak credit record from damaging the other's record and credit score. Contrary to popular belief, a married couple doesn't have a single, blended credit score, Sjoblad said. So if an 800 score marries a 500, they don't share a score of 650. Each has an independent score based on accounts in his or her name.

Adding a spouse as an authorized user to an existing credit-card account or opening a new one together, however, can affect scores for better or for worse.

For instance, a husband with weak credit history could see his score go up if he's added to the account of his wife who has a stellar record, Sjoblad said. But if she's added to his account, she could see her score drop.

If they open an account together, how well they manage it will be reflected in each person's credit score.

But not everything has to be either his or hers. Some planners suggest opening a joint checking account with just enough money to handle household expenses.

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