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Customer & Community Connection Newsletter
Why Might Your Credit Score Be Different Than Your Spouse's?
By Hugh Norton
Like many others, when my wife and I got married, we decided to intertwine our finances along with the rest of our lives. For most couples, opening joint bank accounts and buying a car or home together is the norm. However, even after decades of living together and leading similar financial lives, spouses may find out their credit scores are different.
There are two primary reasons that your credit scores could be different from someone else's – spouse or not. Either the underlying information in your credit reports is different, or different credit-scoring models are creating the scores.
Marriage and your credit. First, let's quickly clear up a few misconceptions about marriage and credit. There was once a time when your marital status was part of your credit report and being unmarried or divorced could make it more difficult to get a loan or line of credit. That's no longer the case.
Now, your marital status isn't included in determining your credit score. It's illegal for creditors to discriminate based on an applicant's marital status. Since your credit score is entirely dependent on the information in your credit report, your score isn't directly affected by your marital status or your spouse's credit. Your credit also won't change if you decide to take a new last name, but both names could appear on your report.
Your credit reports aren't identical. Consumer credit scores depend entirely on the information that's in a person's credit report. Therefore, if you and your spouse have a different score, it could be because there is different information in your respective credit reports.
The differences could be a result of a loan or credit card that you took out individually. Even if you closed a credit card five years ago, it could still be on your credit report and impacting your scores. Unless your spouse was a cosigner on the loan or an authorized user on the credit card, it won't show up on his or her report.
The credit bureaus are competitors and generally don't share information with one another. As a result, your credit reports could be different, and your credit scores could vary depending on which credit report gets used as the basis for the score.
You're looking at different credit scores. In the unlikely event that you and your spouse have identical credit reports, you could still have different scores depending on the credit-scoring model used.
Similar to the way in which major credit bureaus compete to create accurate credit reports, some companies compete to develop credit-scoring models.
If you're looking at your credit score from Credit Score Company A based on your credit report from Credit Bureau Company A, but your spouse is looking at a their credit score from Credit Score Company B based on his or her credit report from Credit Bureau B, then your scores may be different.
Making the most of your credit scores. Having different credit scores isn't necessarily a cause for concern. It's not even uncommon for one person to have several different scores.
Rather than worrying about who has a higher score, try to learn about and understand the factors that will impact both of your scores. Then you can take steps to improve both of your scores, such as paying bills on time and only using a small portion of your available credit.
When it comes time to apply for a loan or credit card, knowing which of you has a healthier credit history and higher scores could also help you strategize how to proceed. For example, only one parent needs to apply if you're taking out a federal student loan to help a child pay for school. Although a credit score isn't considered, the applicant's credit history is, and an adverse credit history could disqualify you. Therefore, you may want the parent with the cleaner credit history to apply.
As an additional example, if you're looking to open a new credit card with a 0-percent introductory offer to finance a large purchase, having the spouse with the higher credit score apply could increase the chances for approval.
Bottom Line: Although getting married won't have a direct impact on your credit, couples' financial lives often become intermingled, and each partner's credit could be important to the relationship's finances. Tracking your scores, understanding what can influence your scores and taking steps to improve your scores can put you in position to make informed financial decisions together.
By Hugh Norton
While learning to discuss and manage money as a couple can be a challenge at first, figuring it out can pay dividends for years to come. It's beneficial to start communicating about money early in a relationship and to maintain open communication on the subject as time goes on.
Like many couples, my wife and I disagree about money once in a while. Like many couples, my wife and I disagree about money once in a while. Generally, though, we understand – and perhaps more importantly, respect – each other's financial decisions, including the occasional frivolous purchase.
We've also learned how to effectively combine our finances and share the financial tasks in our household, which were important steps in building and maintaining a healthy relationship as our family continued to grow.
Options for combining your finances
One of the first money decisions many serious couples make is if and how to rearrange their finances once they decide to spend their lives together. As with many relationship-related decisions, there isn't just one approach that will work best for every couple. However, these are a few popular arrangements that could work for you:
Also, remember that your choice to combine your money or keep it separate isn't set in stone. You can try out different options, and you may find that what works best for you both changes over time.
Say you want to keep your finances separate at first. If one partner stops working after you have a child, that arrangement might not work anymore. You could then split the working partner's income between shared and individual accounts or have it all go to a joint account that you can both use.
How you divide your money among accounts could also play into how you split and share financial tasks. With separate accounts, you both may have to take on some of the bills. But even with combined accounts, you'll still have to decide who's responsible for what.
Don't put all the pressure on one person
One slip up can occur when one partner is clearly "the money person" in the relationship. He or she may be more interested in finances and even (gasp) enjoy budgeting. You may be inclined to let that person handle every serious money-related decision, but that could result in issues down the road.
When one person takes on 100 percent of the financial responsibilities, it can actually lead to resentment in both partners: the money person has an added burden of potentially making the wrong decision for the entire household, and even if the non-money person doesn't enjoy managing money and is comfortable letting his or her partner handle the finances, he or she might not want to be left in the dark when it comes to financial decisions or be made to feel like their input/help isn't needed.
Sharing doesn't mean you both have to be involved in every detail
Sharing financial responsibility can take many shapes and forms. It doesn't necessarily mean you have to split up every task so you both do the same amount of work.
For example, if one person is more adept at managing bills, then perhaps he or she takes on that responsibility. Or, if someone stays home with a child, he or she may have a better understanding of how to manage the home-related expenses.
Even when one person does the physical tasks, like tracking and paying bills, you should still sit down together as a couple to discuss the household's budget, how to decrease bills and how upcoming bills could affect the family. Then, you'll both be involved in the decisions and outcomes.
The same principle can apply to other areas of your finances, such as researching large purchases or choosing investments. Whether you have regular financial discussions or have one-off financial conversations before making any big money-related decision, it's the act of having those conversations that results in both individuals feeling a sense of ownership and contribution.
Bottom line: Managing money tends to be complicated even before you add in all the dynamics of a long-term relationship. However, when you are part of a couple, having a system for how you'll share your money and make financial decisions together could help you avoid problems and keep small disagreements from becoming bigger. Couples can strengthen their relationships when they learn how to discuss money and how to work together to achieve shared financial goals.