I love you, but not your debts
Dear Debt Adviser,
My fiance does not have good credit. As a matter
of fact, his credit is REALLY bad. I, on the other hand, have excellent
credit. I have heard that when two people marry, their credit merges
and the bad credit will drag down the other's good credit. I am very
worried that we will not be able to purchase a house or make other
important purchases due to his bad credit. I also do not want my good
credit to be tarnished by something that I had nothing to do with
in the first place. Is this true and if so, what are some ways to
avoid my credit from being ruined by saying, "I do."
Serey
Dear Serey,
Bless you for warming a financial adviser's
heart by thinking about the future before you find yourself in the
middle of it! Also congratulations on your engagement and for the
fact that you and your fiance have talked about each other's finances.
You would be surprised by the number of people who say "I do"
and have no idea that their beloved is deep in debt, has bad credit
or owes back taxes to the IRS.
I wouldn't expect your fiance's
financial behavior to change quickly, so be prepared! Here's how:
Your concerns about future purchases once you are
married are valid, but know that the credit that you have established
in your own name will not disappear when you are married. You have
worked hard to achieve and maintain a good credit history and please
rest assured that your future husband's past credit problems will
not tarnish your credit history.
The credit history that he has established is his
own. A creditor can only report information that it has and your
husband's current credit (problems and all) was established in his
name only. The only items that will appear on your credit report
are those that the two of you enter into together. So a word to
the wise; don't co-sign or open joint accounts until your intended
shows lots of improvement.
My recommendation for your fiance is to begin work
now to repair his credit history. By, now, I mean between today
and the wedding. Not that I'd recommend you delay the date just
on account of his credit, but as Ben Franklin said, "Act in
haste, repent at leisure."
He will want to pay off any charged-off accounts and
bring late-payment accounts current. Once current it is important
to continue to make on-time payments. After a year of re-establishing
a good payment history, his credit should improve. Potential lenders,
just like you but for other reasons, are often willing to overlook
past credit indiscretions if the person's present history (last
year or two) is good.
In addition, he may want to review the path that led
to his credit problems and work out ways to avoid those situations
in the future.
So after the wedding and when you are ready to purchase
a home, your excellent credit score and his improved credit score
together should translate into a reasonable if not great interest
rate for a mortgage loan.
I would also encourage you to sit down with your future
spouse and map out a strategy you both can live with to get his
credit history on track and determine the timing for purchasing
a home. It is extremely important to communicate and establish early
how money will be handled in any relationship.
Topics you may want to address include:
- Determine your combined incomes and create a spending
plan.
- Discuss your financial goals and include them in
your plan.
- Decide how bills will be paid: together, separately
or assigned to one person.
- Establish checking and savings accounts. You will
have to come to a decision as to what accounts to open, separate
ones for each of you or joint.
The No. 1 topic about which married couples fight
is money. The discussions you have about your finances may not be
romantic, but they will avoid problems in the future.
Finally, I have always been a fan of long engagements.
This time is no exception! I wish you and your fiance the very best!
The Debt Adviser, Steve Bucci,
is the president of Consumer Credit Counseling Service of Southern
New England. Visit CCCS
for additional debt
advice or click
here to ask a debt question.
|
