Valentine's Day is a time to plan the perfect date, choose the ultimate gift-and discuss your credit scores. Wait, what?
Americans are expected to spend a record $20.7 billion for Valentine's Day gifts and entertainment in 2019, according to a survey sponsored by the National Retail Federation (NRF). This is up from $19.6 billion in 2018. Individual consumers will spend an average of $161.96, up from $143.56 last year, the NRF said, a 13 percent increase.
Before you go on a spending spree to show your love, try a different tactic this year and get on the same page with your partner about debt. It might just be the key to building a stable and happy future together.
Here is checklist to help guide the conversation:
Trade Credit Scores
Turns out your credit score might predict more than your ability to get a loan. It could also be a good indication of how long your relationship will last.
There is a clear correlation between credit scores-generally a number ranging from 300 to 850 that is used by creditors to predict how likely an individual is to pay back a loan on time-and relationship stability, according to a study published by The Federal Reserve.
When there is a large gap in the credit scores of two individuals at the beginning of their relationship, the relationship is more likely to fall apart, according to the analysis of 15 years' worth of data from the Federal Reserve and the credit rating agency Equifax on more than 49,000 couples. In fact, couples who began their relationships with a gap of 66 points or more are 24 percent more likely to break up within two to four years and 12 percent more likely to separate during their fifth and sixth year.
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This makes a lot of sense. After you're married, you will each continue to have your own individual score. However, if you apply for credit together, such as for a mortgage, your partner's credit score will be taken into account. And credit scores may impact a more fundamental, essential element of relationships: trustworthiness.
Uncovering unpleasant surprises after you have been in a long-term relationship and are considering marriage might increase tensions. If you learn that your partner has a low score, it doesn't have to be a deal-breaker. Rather, the sooner you know about it, the sooner you can work together on a plan to improve it.
You can access your credit scores in a number of ways , including possibly from your credit card provider, your bank or credit union, a non-profit credit counselor, or a credit-reporting agency. Depending on your source, there may be a fee.
You might also want to pull and share your credit reports , which will provide detailed accounts of your credit histories. By law, you're entitled to a free credi t report from all three major credit agencies annually. You can access your free credit report at annualcreditreport.com .
Tally Up All of Your Debts
Don't let debt weigh down your relationship. Couples should share all of their liabilities with each other, including credit card balances, auto loans and student loan debt. Get them out in the open so you'll each know exactly what the debts are, their interest rates and when they are expected to be paid off.
It's important to understand how your significant other is managing his or her debts to look for red flags. For instance, you'll want to know if he or she is just paying the minimum required payments on credit cards, as opposed to paying off or seriously chipping away at balances. You'll also want to know whether-and, if so, how often and how much-your future partner tends to borrow from friends and family. Do those less formal, yet no less significant debts ever go unpaid? These questions can help give you both a sense of whether you have similar views when it comes to money-and to discuss any differences .
Partners shouldn't hesitate to ask each other what caused their debts in the first place to help avoid any debt problems in the future. Also be sure to work as a team to come up with solutions to tackle debts, especially those with high interest rates.
Agree To Have Regular Debt Talks
Now that you've shared information about your credit profiles, you can start to make wise decisions together.
Will you apply for a mortgage together, or might it be better for one partner with the better credit to apply individually? What kind of cuts are you both willing to make in your spending that will help you pay down your debts?
Whatever you decide, be sure to keep the conversation going long after the honeymoon phase passes. Don't let debt get in the way of a happy, fulfilling life together.
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