Recs

6

Love and Credit Don't Mix

There's no arguing that, financially, twosomes have a leg up on their single competition. Couples get price breaks on insurance premiums, save money by splitting the cable and electric bills, and have built-in justification for buying the family-sized bag of chips. Scoring the best interest rates on big loans (to buy homes and cars) is more of a snap, too, since dynamic duos have two credit scores from which to choose.

Don't let all the togetherness go to your head, though. While it's tempting to show your love and trust by adding your partner's name to every account, all that sharing might not be in your best interest.

Being overly chivalrous with credit could lead to a long stay in the financial doghouse. Should the unthinkable "d" words arise (namely, "divorce" or "death"), leaning too much on your significant other can prevent you from standing on your own two feet, credit-wise.

Look out for No. 1
When it comes to commingling credit, a dose of self-interest is due. While there's no such thing as a "couples" or "joint" credit report, if you both are named on a loan or listed as joint account holders, any flub-up (late payments, defaults) on the account will mar both of your credit files, no matter who forgot to put the mortgage check in the mail.

The biggest danger couples face is losing their individual credit autonomy. It doesn't take long for a credit file to go dormant, either. As little as six months of no activity on an account can make a person unscorable. (You'll still have a credit file, but without anything for your lenders to report, the credit-scoring system just kind of gives up.)

What's the big deal? If you find yourself on your own because of either of the aforementioned "d" words, your access to lines of credit could be swiftly cut off. Without established and active credit in your own name, you'll have a harder time qualifying for loans or new cards.

On the flip side, there's bad news for those trying to boost their score by becoming an authorized user on a loved one's accounts and piggybacking on their partner's better credit DNA. Starting in September, the popular FICO scoring model (from Fair Isaac (NYSE: FIC  ) ) will no longer factor "authorized user" accounts into its formula. That leaves only the option of naming your sweetheart (or kid) as a "joint account holder" -- a legal relationship not to be taken lightly. Doing so is like adding "Until debt do us part" to your vows. If things go south in your relationship, untying the credit knot can get complicated if you're both unwilling to let go of joint accounts.

Credit tips for twosomes
A few simple moves now will keep things harmonious on the home front -- and in your credit files.

Keep your reputation intact: Maintaining your self-sufficiency in bankers' eyes is easy to do -- and you won't even offend your spouse: Simply keep the accounts you established in your single days open. But don't relegate those cards to your sock drawer -- rotate them into use every few months and use them for small purchases to give card companies activity to report.

Share your credit secrets: Put it all out on the table. Pull your free reports at annualcreditreport.com, dim the lights, and review each other's reports (without judgment or eye-rolling!). If there's a mess to clean up in either (or both) of your files, then work on it together. Or if friendly competition is more your style, see who can improve their credit score the fastest. (See our eight tips on boosting your FICO score fast in the May issue of Motley Fool Green Light. If you're not already a member of the service, be our guest for free for the next month.)

Vow to pay those bills on time: Nagging's not attractive, but a few moments of bickering about whether payments were sent in on time is better than months of trying to clean up a credit mess.

Dayana Yochim is the author ofThe Motley Fool's Guide to Couples & Cash and the on-call phone-a-friend for her coupled pals having financial tiffs. Over at Motley Fool Green Light, she offers money fixes for brides, grooms, bridesmaids and wedding crashers. She owns no shares of Fair Isaac. The Fool's disclosure policy understands the meaning of commitment.


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