What To Do If Your Spouse Has Bad Credit
June 26, 2017Have you generally been financially responsible but your spouse or fiancé has made some bad financial decisions? Are you worried that your spouse will drag you down financially, or if you can make the debt and/or bad credit go away quickly? If so, you aren’t alone. Debt and poor credit scores are the norm.
According to a study from CFED, 56 percent of American consumers have sub-prime credit scores, which means they don’t have access to the best interest rates for mortgages, credit cards and car loans. Debt is a way of life for most Americans, says NerdWallet in a 2016 American Household Credit Card Study, with the average amount of credit card debt for those who carry it totaling $16,748. Over 44 million Americans have student loan debt, with 11.2 percent of borrowers delinquent or in default.
Does that sound familiar?
For better or worse
If you have a financially mixed relationship, I’ve got some tough love for you: even if you aren’t legally responsible – although in community property states you will be – it’s still your issue to deal with, too. Marriage is a legal partnership, not just an emotional and spiritual relationship. The only way to deal with debt or credit problems – either your spouse’s or yours — is for both of you to face them head on. If you don’t, it’s only going to get worse.
Excessive debt can drag down your financial life as a couple and lead to a cycle of low financial wellness, where you live paycheck to paycheck without building up emergency savings or saving for retirement. Plus, let’s face it – it can lead to some nasty fights! It’s best to prioritize paying debts as a married couple, even if they aren’t yours, because marriage is also an economic relationship. Each partner affects the whole.
Stop blaming your spouse
Do you plan to stay married? Ok, then stop blaming your spouse for the situation you are in as a couple. Let it go. Blame and shame are not going to move you forward, and may actually make it much, much harder to negotiate changes in in your spouse’s behavior. Consider working with an unbiased CERTIFIED FINANCIAL PLANNER™ who can coach you through the process of figuring out how you are going to tackle the situation together. Find one by asking your workplace financial wellness program or look for a Fee-Only CFP®.
Practice full financial disclosure
When my husband and I first got together, we had the Money Talk. I was honest with him about where I was in my financial life (paying off some debt from a former business, downsizing my lifestyle so I could save more). Although he’d had it together since graduating college, he wasn’t the slightest bit judgmental. In fact, he was able to look at the situation quite logically and before we got married, we figured out a plan to tackle the last of my student loan and business debt.
We developed a strong, unified vision of where we wanted to go in our lives and how we would manage money together. (You can read our story here.) Keep talking about money throughout the evolution of your relationship: have money meetings and make sure you understand each other’s financial values – the number one reason couples fight about money.
Set everyone up to succeed
Set up a system where the less savvy partner can succeed. This means:
- Avoiding blame or judgement
- Making money management a team effort
- Setting up “yours, mine and ours” accounts for cash management so everyone has some control over some of their spending
- Monitoring your credit monthly
- Celebrating small wins
Consider workarounds to protect your credit
In the meantime, consider workarounds to protect your own credit and repair your spouse’s, such as putting some bills in an individual name and avoiding joint credit cards, car loans or mortgages, etc.
Worst financial enemy or best friend?
Let’s be realistic – if you weeded out everyone in the country who had debt or less than perfect credit, the pool of potential mates would be pretty small. That doesn’t mean it’s not important to address in your relationship, though. How you deal with credit card debt, student loans and/or poor credit scores in your relationship will determine the financial foundation of your marriage.
As our CEO Liz Davidson wrote in What Your Financial Advisor Isn’t Telling You, your life partner can be your worst financial enemy or someone who lifts you higher. Even if you don’t have the same levels of financial wellness levels when you start your life together, with good communication and ingenuity you can be best financial friends.
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