Everybody loves a good credit score. It helps you get crucial services like utilities, cell services, and insurance at a lower price while also enabling you to get favorable rates on car loans and mortgages. But what if your score is great while your partner's isn’t? If you plan to co-finance an asset like the purchase of a home, the imbalance in your scores could prove problematic.
Debt puts a strain on nearly every aspect of your life, and your relationship is no different. Money squabbles are a top source of discord among partners. If you and your loved one can’t get on the same financial page, your relationship may be doomed. A study by the Federal Reserve found that couples with drastically different credit scores aren’t likely to last in the long run.
You have a lot to gain if you and your partner both have good credit. So how do you go about helping them boost their score?
#1 Forget the blame game
It doesn’t help to point fingers. Maybe your partner was a bit irresponsible with his or her spending in the past. If it’s in the past, don’t dwell on it. By laying blame you breed resentment, and that can make things worse with your relationship.
Instead, put your heads together and review your credit reports. Assess the problem areas and figure out what you can do and what factors are pulling down your partner’s credit score. Maybe it’s a collection item or too-high credit card balances dragging it down.
Knowledge is power.
#2 Set up a budget
It is important that you work together to control your household spending. You need to adopt sound money management habits to benefit you immediately and also in the long run. Establishing a budget (and sticking to it) is one of the best first steps.
Create a household cash fund you both can access. Use this instead of credit cards if you have habits of overspending with plastic. Also, set up an emergency fund for unexpected expenses like car repairs, appliance outages, and medical costs.
Good habits are crucial.
#3 Create a plan
If your partner has excessive debt, it can drag down their score and cost you credit opportunities. You need a plan to defeat your partner’s debt together. You can’t leave them to do it alone and expect meaningful results (refer to “laying blame” above).
Figure out the best way to tackle the debt. Usually, it’s by eliminating the highest interest rate balances first to save money. This ensures that you pay less overall in the long run and once you get a debt paid off, your partner’s score should begin to improve.
Planning is important.
#4 Share an account
You can also use your good credit to boost that of your partner. Making them an authorized user on your credit card that’s in good standing can help. Your good credit history will spread to them, but you must be sure they won’t abuse your plastic.
Also, work on getting your partner their own card. Obtain an unsecured card to start building credit. If they can’t get approved, go for a secured card instead. Spending moderately and paying off in full each month helps.
Get started ASAP.
#5 Don’t be the cleaner
You and your partner should function as a team. Don’t put yourself in the role of cleaning up their mess for them. Avoid situations where your partner runs up credit card bills, and you swoop in and save the day.
Your partner must accept responsibility for cleaning up their credit predicament. However, you are there to support and help them as they improve their financial management skills and develop better credit habits.
To help improve your credit score or your partner’s, check out Credit Score Keys today.