6/21/2012 10:10 PM ET|
4 credit tips for newlyweds
If you haven't had a detailed discussion about finances, now's the time. Among other things, you'll need to come up with a system for getting the bills paid.
Congratulations! You survived the big wedding day, hopefully enjoyed a blissful honeymoon and are now settling into married life. Successful marriages require a lot of effort by both parties, and that includes learning to manage finances together. Given that financial trouble is one of the leading causes of divorce, surprisingly few newlyweds openly discuss 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 in the relationship and should be periodically revisited. This is sometimes a difficult conversation in today's world, given that most people entering marriage have been financially independent for a number of years and are accustomed to making financial decisions independently.
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 four tips can help you use credit wisely.
1. Know where you stand. Each of you should obtain a copy of your credit reports to ensure the information contained is accurate and up to date. You can do this at no charge at www.AnnualCreditReport.com. Should you find errors, follow the dispute-resolution instructions so that they can be investigated and resolved as soon as possible.
You might consider ordering your credit scores to see who has the higher score and work together to improve each other's credit scores if needed. For example, paying off a 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 reports in the future so you can be sure they are accurate before you apply for credit.
2. Don't cancel or close down pre-existing credit. Your credit file is created, stored and updated at the individual level -- even after 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, as that could hurt your score, and leaving it as-is is unlikely to do any harm. In addition, it is a good idea to maintain some level of credit in your own name. 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).
With your credit cards, you can always add your spouse as an authorized user versus opening a joint account. Remember, once you do, that credit card account will be reported on both credit reports.
3. Apply for credit only when needed. Many newly married couples are excited about starting their new home together and go a bit overboard 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 new credit lines can lower your score and could cause your cost of credit to increase, as some lenders (in the car-loan area, for example) set interest rates higher when credit scores are in the lower tiers.
4. 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 big, negative impact on credit scores.
These tips can help you manage your credit more effectively, which will increase your access to wider range of lower-cost credit -- and prevent the stress often associated with poor credit.
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