When you're marrying the girl...and her credit

Q: I have excellent credit, but my fiancée has bad credit.  How will that affect our future purchases?  Can you give me some tips and advice?  By authorizing her to use my credit card, will I affect my credit score?

-Ronaldo, U.S. Army

A: Wow, what a great and insightful question!  I’m pleased that you’re thinking about your life together rather than just being in the moment.  Very smart.  I’m glad she’s your fiancée and not your wife…yet.  There’s still some work to be done before the big day.  The question you need to ask, discuss, and work out is whether your fiancée’s poor financial habits will jeopardize your marriage!  Because, of course, money is a major source of fights and more serious marital challenges.  I would definitely recommend frank financial discussions about spending habits, saving for goals and budgeting before you get married.  It would be wise to even consider professional counseling on this front.  It is that important. 

Now to your specific questions.  First, her bad credit score could most definitely have a negative impact when you make joint purchases.  It could result in higher interest rates, lower credit limits, and even impact the availability of credit.  In the case of a mortgage, you could pay hundreds more in interest every month due to a poor collective score!  And, I know that is hard-earned money in the Army!  See examples on www.myfico.com.  Allowing her to be an authorized user on your credit card, in and of itself, will not affect your score—that is unless she exhibits the same behaviors that might have resulted in her poor credit record. 

So, assuming that you two have that all-important financial pow-wow, and agree to be jointly responsible, I would work on building up your fiancée’s credit by taking the following steps:

• Start by having her pay down any credit card balances to 50% of the maximum allowable balance (ie., a $10,000 limit would call for a balance of $5,000 or less), then work her way to 35% with the specific goal being zeroing out her cards.  This helps to illustrate responsible use of available credit.
• Pay “charge offs” listed on her credit report. That could be an old cell phone (I have personal experience with this one!), a medical bill or any number of things.  This will help to drive up her score because she is showing financially responsibility.
• Use credit responsibly.  You will likely need credit to purchase your first home together. And you want the best score possible.  To have a good score, you need to use credit – but don’t overuse it!
• Make payments on time every time! 

You can ruin a credit score practically overnight!  But repairing it takes a lot of time.  Be patient and persistent.  It will be worth it.  Make a “Monthly Money Date” part of your lives now and especially as you marry. You both need to stay on top of your finances so that you may live within your means, pay the lowest possible interest and achieve your joint financial goals.  Good luck in your lives together!

Comments

[Dan]

Yeah, I know. I have 46,000 in debt and my girlfriend wants to get married?? How's that going to work.

[SFC Anne Arnold]

I'm afraid I disagree with June regarding the authorized user. I have been an authorized user on my ex husbands credit cards and when he decided to file bankruptcy in 1999, all of the creditors that were dischcarged decided to come after me and still are for the unpaid balances. I have had and still have perfect credit in my own name but these accouts that have followed me for ten years and hve been sold from collection agency to collection agency are destroying me. Sure, I have fought them and gotten them of at least one of my credit reports only to find them back again in 30-60 days.

Also, although they're not supposed to, "authorized user" accounts can count against your credit rating just as though they were your own both as total credit amount and debt to income ratio.

So I would suggest that they both need to sit down and clarify their spending polcies especially when it comes to credit!

[brianp67@aol.com]

Hi, I am Brian USN retired. Before I got married my ex had over $28,000 in debt, but she was able to pay off the debt, but when we got married we ended up in 50k in debt. Don't know how that happened. Of all things she spent at least 40 precent of it on herself. I tried all sorts of legal aspects to payoff the loan, before bankruptcy. After more then two years of going through various programs and nothing seemed to work, I filed bankruptcy. Granted it has been 5 years since and I been able to rebuild my credit. My suggestion is figure out how materialistic your new wife is and how far in debt she is. If she is $10,000 and above, tell her she needs to be 1,000 and below. Otherwise it will mushroom on the both of you. Needless to say the money that you will spend paying the minumum could be money saved for a real nice vacation, not to mention if you have childeren. No, you don't get any extra money for kids, urban legend stuff. If she cannot control spending, ie., like a 400 dollar dress to impress, forget it. Feed your pockets not your ego. Always remember this: the person that has the bigger prize is much poorer the the person with the smallest prize. There is nothing wrong shopping at Walmart even if you were high ranking officer. Granted they get good money but you will be richer then them
if you don't live in fantasy land. I hope you find this most comforting and always stay real. I learned my lesson. Oh by the way, my ex is now $25,000 in the hole. Me? $1000 with a savings of $6000 giving me a net worth of $5000 not to mention my stocks and bonds. She makes $60,000 to my measley $22,000/yr income and she has no savings or a vacation fund like I do. Have a great day....