Your spending and payment patterns are critical to your financial future. In need of some fiscal fine-tuning?
It’s only three digits, but that little number—your credit score—is an important key to financial success. Planning to buy a home? Do you need a new car? The higher your number, the better positioned you’ll be for low interest rates and generous lending terms. Get on firm footing with expert advice from Maxine Sweet, vice president of public education at credit bureau Experian.
Bridal Guide: What is the first piece of credit advice you would give to a newly married couple?
Maggie Sweet: Know where you stand individually before you move forward together. A good place to start is with copies of each partner’s credit report and credit score. Be aware that credit reports and credit scores are two different things. A credit report is a profile of your credit use (loans, credit cards, mortgage). As well, the report details your payment record, whether you pay your bills on time and how much of your credit is outstanding.
A credit score uses this information to assign a number (ranging from about 300 to 990, with strong scores in the 700 or 800 ranges, depending on the scoring system used). Lenders look at the number to see where you fall in the range of risk. Credit reports are free; there is a charge (about $15) for a credit score.
BG: What if one partner has a poor credit score? Does it impact the other?
MS: There is no such thing as a joint credit report. Once married, your credit report is not combined with your partner’s. You will both continue to forge your individual histories. That said, if you set up a joint credit-card account, its payment history—good or bad—will go on each of your individual reports.
BG: How can someone improve his or her credit score?
MS: It’s not as difficult as you might think. Number one is to never skip a credit-card payment. A single missed payment can make a significant ding on your score. Two: work to maintain a healthy gap between the balance you owe and your actual credit limit; keeping your utilization under 30 percent of your limit will also help boost your number. Ideally you will pay in full every month; but even paying down your balance consistently will demonstrate you can handle dept responsibly. Also, don’t shut down an existing account: it only reduces your available credit (and lowers your score). Credit reports are more heavily based on current practice than on your past actions. The good news is that people can recover from poor scores in as little as six to nine months—it’s not all gloom and doom.
BG: Any final words of wisdom?
MS: Everyone has a different style when it comes to managing money. Get to know each other’s attitudes and practices so you are working from a place of knowledge and trust. Sharing your credit reports helps establish this. Who’s going to manage what? Set up a plan so you know who is going to be responsible for which elements of your budget. Have an open discussion. There should be no secrets or surprises.
Tip: Make a date to review your finances every month: not just bills, but savings, checking, retirement plans, loans.
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