By Kate Browne
Nothing unravels a blossoming relationship quite like a bad credit history. Seriously!
Ok I know what you’re thinking “yeah right sure finance lady, it’s not about how you look or how you come across personality-wise or even if you are a dog or cat person it’s all about your credit report…give me a break.” And well that might be true, bear with me…. If you are going on a date it just might be worth checking your credit report – as well as the mirror – before heading out the door.
Not convinced? Consider this. As a relationship starts getting serious, most of us will begin to share intimate personal details, our respective dating histories, deepest darkest thoughts and maybe even some plans for a future together. Yet despite this, Finder research shows there’s one particular detail that Aussie love birds are reluctant to divulge: their credit score.
You might be wondering “what even IS a credit score?” Let alone wanting to show it off to your lover. So put simply, your credit score is a number that lenders will look at to determine how risky you are as a borrower. It’s calculated based on your credit history and ranges from 0- 1,000 or 0-1,200 depending on the bureau you choose to access it through.
A “good” score ranges from 622 to 725, while an “excellent” one sits between 833 and 1,200. The higher your score, the more likely you are to be approved for financing.
On the flip side, a “poor” credit score sits below 600. Bad financial behaviour like defaulting on a loan or applying for too much credit will drag your score down. If you decide to apply for a homeloan together, the bank will take both credit scores into account when assessing your application. This means that if you have a good score but your partner has a dud score, your application may get knocked back.
So you can probably see how your credit score, while deeply unsexy, is really important if you and your other half want to start a life together. Yet despite this, just 17% of Aussies have considered the effect of their partner’s credit score on their own borrowing capacity. Whether we like it or not, money is a huge and important part of life, so it’s important to have a clear understanding of your partner’s financial situation early on. Discussing your partner’s credit history may not be the sauciest topic, but it could be one of the most important conversations you’ll have when starting out – especially if you’re planning to go the distance together.
If you’ve had “the talk” and found that you or your partner’s score leaves a little to be desired, this doesn’t have to spell disaster. A bad credit score can be improved over time with a few simple changes to the way you manage your money. While the score won’t improve overnight the sooner you make some positive changes the sooner you will be on your way to financial improvement in the long term.
So where to start? The first thing to do is to check your credit score online, which you can do for free. You’ll not only find out what your credit score is, you’ll also receive a detailed history of any defaults or debts listed in your credit report. Also make sure all listings attributed to you are correct – you don’t want your score to be brought down by a system error.
Once you’ve checked your report, sit down with your partner and work out how much debt you’re in. If you have debt spread across multiple credit cards or loans, it’s a good idea to consolidate it all into a single loan to minimise fees and interest. This looks much better from a lender’s perspective as well.
Defaulting on payments can also hurt your score. Auto-repayments can prevent you from missing a payment (meaning you’re free to forget all about it). If you and your partner have recently moved in together, make sure all your personal details are up to date – you don’t want important things like bills being sent to the wrong address.
Finally, don’t keep applying for credit until things have improved. Lodging numerous credit applications can be a major red flag that you’re a financial risk. It’s also worth lowering your credit card limits if you can.
If you and your partner think your finances are too messy to manage (or neither of you are numbers people), then why not leave it to the professionals? A financial advisor or a mortgage broker can provide excellent advice on where you stand financially and can help you come up with a solution to improve the situation down the track.
And most importantly, it’s not all doom and gloom. Just like leaving the toilet seat up or eating all the good leftovers, a bad credit score shouldn’t be a reason to ditch your partner just yet. As with any irritating habit, you can improve a bad credit score over time.
And while I’m definitely sure you shouldn’t drop the credit score bomb on the first date (you totally need to find out if they are a cat or dog person first!) – or let’s face it, the second, third or fourth – it’s a good plan to bring up the finance “talk” within the first year. And I know, a conversation with your partner about their finances doesn’t exactly scream romance at first, you’ll totally give yourselves the best chance of a successful future together. And what could be sexier than that?