Nothing can sour a relationship like a nice talk about money and debt.
Throw in some chit-chat about your beau's credit score and soon you may be shouting "What the FICO?"
What the FICO, indeed.
But there's hope. With the right kind of communication, couples can figure out how to support a better half with a worse credit history, or decide when it's better to preserve financial independence, says Adam Levin, former director of New Jersey's Division of Consumer Affairs and co-founder of Credit.com, a consumer advocacy website.
Here's Levin's advice for couples who clash over credit:
MainStreet.com: What’s the best way for couples to approach conversations about credit?
Adam Levin: There’s only one way and that’s straight on. Just honesty, transparency, openness and [it should take place] as early in a relationship...as possible.
MS: What do you need to tell your partner about your credit?
AL: You really need to be open if you're having any issues, what your credit score is, if you've had any negative experiences on your credit that might in any way negatively impact the partnership because, let's face it, a relationship is not only an emotional partnership, it's a financial partnership.
MS: When is it good for couples to combine credit?
AL: I don't know if it's ever really good to combine credit. I think it's a natural tendency, that couples want to do it as part of the process of bringing themselves closer together. But I think that couples must always maintain separate credit files because death, illness, or divorce requires that each member of the couple be able to stand on his or her own feet.
MS: How is it best to proceed if your partner has bad credit habits?
AL: The first step is to determine how bad. Sit down, take a look at the credit report, determine what the problem is. Is the problem that he or she doesn’t pay on time? Is the problem that they don’t have enough credit, so their file is thin? Is the problem that they’re using too much of their credit, that their balances are too high, so therefore some need to be paid down?
Step two is [to] figure out what things you might be able to do—whether you add your significant other to a credit card, whether you cosign for them, whether you perhaps have a CD and make it collateral for a small loan from the bank so that you pay it back. These are different strategies that can help people strengthen their credit. You always want to be in a position to help the partner who is the most credit-challenged strengthen their credit.
MS: On the flip side, is there a way to unravel yourself from an ex if you've merged finances?
AL: The most important thing is that people must always remember, regardless of whatever deal you make among yourselves, and whatever deal is actually approved by the lawyers in a court, it isn’t necessarily a deal that the creditors buy into. With creditors, the reality is that “‘til death do us part” perhaps has even more meaning to them than it does for you. You need to communicate with your creditors.
If you break up, find a way to make sure that the statements go to each of you so you know exactly what’s going on. If your partner falls behind because of a traumatic situation—a layoff, or an economic hardship—you may have to step up. Stepping up isn’t necessarily letting your partner off the hook. It’s actually protecting your position, because if it’s joint credit, and it’s not paid on time, or the other partner goes credit crazy, it will impact you.
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