Why You Should Check Credit Before Marriage
February 09, 2023Your credit reports and histories do not merge with your spouse when you get married. However, both credit scores and payment histories will be used for many aspects of your financial life. Here are several ways a couple’s combined credit scores can impact their lives together:
Your Ability to Get an Apartment
Landlords routinely do credit checks as part of their screening process. They will likely require each of you to file a rental application. While there is no standard credit score to rent an apartment, the average renter’s score for 2020 was 638. However, you may need a score near 700 in competitive markets like San Francisco, New York, or Seattle.
The Cost of Your Mortgage Payment
Many factors go into acquiring a mortgage. In joint mortgage applications, the lender will use both credit scores to determine your interest rate and whether you qualify.
The higher your score is, the more likely you’ll receive the most competitive interest rate. With a lower score, you may still qualify for a mortgage. However, you risk a house payment of hundreds more per month to buy the same property.
How Much You Can Afford for Future Cars
Like a mortgage, your score will determine the interest rate you receive if you decide to finance a car. While it’s possible to buy a car with cash, many of us still finance a portion of our cars. In fact, in 2019, 55% of all used vehicles were financed.
According to the 2022 Experian State of the Automotive Finance Market, the average interest rate for a used car loan with a credit score above 780 was 3.69%. Meanwhile, the average used car loan for someone whose credit score was between 500 – 600 was 15.86%.
This means that a lower score increases the monthly payment difference for a $20,000 used car by 33%.
How Much You Pay for Car Insurance
Unfortunately, it doesn’t stop there. Your credit score can impact your auto insurance rates. A consumer’s credit information dictates a numerical rating known as “credit-based insurance scores”. Insurance companies use these scores to price insurance policies. In short, the insurance industry has determined that credit scores, a measure of how a couple manages their financial matters, is a good predictor of insurance claims.
What To Do If You Have Bad Credit
The good news is that you can take steps to improve your credit score. Plus, the sooner you communicate a shared goal of improving credit, the sooner you can improve your scores.
- Request Free Copies of Your Full Credit Reports.
Visit www.annualcreditreport.com to request your reports from all three agencies (Equifax, TransUnion, and Experian). Review them carefully, looking for items that aren’t yours. These can include paid balances reporting as outstanding, things that have been reported multiple times, and other mistakes.
If you find an error or fraudulent activity, immediately go to that bureau’s website and file a dispute. You can file with each bureau through its unique online process.
- Catch Up on Any Past Due Payments
Don’t ignore your debts. Be proactive and talk with creditors if you have fallen behind or fear that you may soon fall behind. See if they will allow you to make alternate payment arrangements or if they are willing to negotiate the debt.
- Pay Down Your Balances
The total debt you owe makes up 30% of your FICO® Score. Paying down both of your outstanding balances can lower your credit utilization rates, increasing your scores.
- Educate Yourselves and Continue to Monitor
Several other strategies and services to help you improve your scores. The more you learn the specifics of your credit, the better prepared you will be for your financial life together.
Nurturing a relationship is hard enough, and maintaining financial wellness is only one factor contributing to a relationship’s success. Nonetheless, it is a crucial factor; the more you communicate, the more you can work on it together.