Fixing Bad Credit May Take Two

We’ve all heard that fixing bad credit can help us save money — we get lower interest rates on loans, better premiums on car insurance and even employers look at credit reports before hiring candidates for an opening.

With many relationships being tested by money problems, your credit score could also be hurting your love life. Knowing each other’s credit history and score can give you a clue about your possible financial future together.

Basics Before Fixing Bad Credit

First off, knowing how credit scores are calculated is important when fixing bad credit, because you get an idea of what needs to be adjusted. Credit scores are calculated by a few financial factors:

35% – Payment History
30% – Amount Owed
15% – Length of Credit History
10% - New Credit
10% - Types of Credit

Just by looking at how each factor is weighed, you can pay down debts consistently and not only decrease the amount of debt owed, but also develop a solid payment history. If you have a bad credit score, here are more tips on how to increase your credit score.

Working as a Couple to Increase Your Credit Score

If you’re serious about your relationship, but are also concerned about finances, then working on a plan to increase your credit score by paying down debt is a win for both parties. Before you get started though, sit down and have a conversation with your significant other to get a clearer picture of the situation.

Credit scores themselves only gives a limited amount of data. For example, those who avoid taking out loans or credit cards may be in be fantastic financial shape, so don’t just rely on credit bureau numbers.

Some crucial questions to ask include:

What are bad credit scores due to? Are there too many outstanding loans? Is the score a result of credit card debt or student loans?
Is he or she making changes to fixing their finances? If they haven’t, then why not? You can’t help someone unless they want help themselves, too.
How committed are you to fixing bad credit? Are they shrugging it off or tackling this challenge head on?

My husband and I had a big talk about our finances (balances and all) when we were engaged. He was completely debt free, save for a very small student loan (paid shortly after graduating) and I had a car loan and student loans. I was ready to work on my debts by myself, but he encouraged me to repay the debt down together.

Each couple has to talk it out to see what to do next. Depending on the answers you give and receive, you two may either break up or team up.

Who Shoulders the Debt in a Marriage?

If you’re already married and have debt, the next question may be whose responsibility is it to pay the debt back? Legally speaking , it depends on which state you live in.

Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin are community property states, meaning that income and debts acquired during marriage are shared. Check your local laws to find out if that is the case for you.

If, as a couple, you decide to help each other increase your credit score by tackling debt, using Dave Ramsey’s debt snowball plan can be an incredibly effective and motivating approach.

Do you have any idea what your significant other’s credit score is? Have you two worked out a plan for your finances together?