How Not to Pass Bad Credit Along in a Marriage
For many couples, marriage is tough enough without additional problems caused by bad credit. Excessive debt and derogatory information on credit reports are indicators of poor credit. Couples in that situation entering marriage could face a lifetime of paying high finance charges, potentially costing tens of thousands of dollars over a lifetime. Couples can avoid this by discussing their credit situations before marriage and creating a two- or three-year plan for building excellent credit.
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Conversation
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Couples should share their credit reports with each other before marriage. However, some couples barely discuss credit and finances before heading for the altar. Nearly two-thirds of the couples responding to a “USA Today” poll in 2006 said they really did not talk about finances until after the wedding. That can cause tension or problems if the couple is unable to qualify for certain forms of credit after marriage, or is forced to pay big down payments or accept huge interest rates.
Annual Credit Report
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AnnualCreditReport.com offers free credit reports under the terms of the Fair Credit Reporting Act, a federal law. The Federal Trade Commission endorses the site as a legitimate source for completely free credit reports. A couple entering marriage should obtain their credit reports from the site and study them for credit problems, such as delinquent credit card accounts and other derogatory information. The couple should also check their individual credit scores by following instructions on the credit report for ordering the scores separately, for a fee.
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Scores
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Credit scores are three-digit numbers ranging from 300 to 850. Ideally, both partners should enter the marriage with scores of 720 or higher. Scores in that range lead to the lowest interest rates -- and easy credit approval if the couple meets other qualifications such as income. Scores below 620 are poor and should serve as a red flag to the couple, especially if both partners have scores under 620.
Counseling
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Couples looking to clean up their credit before marriage should pay off all delinquent debts or make payment arrangements with creditors or debt collectors. Delinquent debts could include charge offs, collection accounts and judgments. Charge offs are accounts closed for nonpayment. Collection accounts are accounts placed with debt collectors. Judgments are court orders requiring a person to pay a specific amount of money following a lawsuit.
Timeline
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Complete credit rehabilitation could take two or three years, but a commitment to sound credit practices is the first step. Credit scores usually increase as the couple pays off delinquent debt, pays all other bills on time and pays down the balances on revolving accounts. It’s also important before the marriage that the couple discuss major credit issues such as judgments, foreclosures and bankruptcies. An active judgment could lead to bank or wage garnishment. A past foreclosure could make it impossible for the couple to qualify for a mortgage for several years. A bankruptcy appearing on the credit report could make it it difficult to qualify for the best rates on loans for several years.
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