Will Your Relationship Last? Credit Scores May Hold the Answer.

Posted By Matthew Clawson || 20-Jun-2016

You may be aware of the financial consequences of a low credit score as they relate to credit interest rates, qualifying for loans, ease of acquiring new assets and liabilities, and so forth. What you may not realize, however, is that your credit may be a solid indicator of your ability to commit and maintain long-term relationships.

2015 census data indicates that a household with a combined income of less than $75,000 has a significantly higher divorce/separation rate than those whose annual incomes equal or exceed $75,000 per year. If financial hardship is one of the major reasons for a relationship breakdown, then it follows that those couples with higher credit scores are more likely to succeed than those whose scores fall at the lower end of the spectrum.

After testing this theory for the first time in history, in November 2015 the Federal Reserve Board issued a report titled Credit Scores and Committed Relationships, in which the positive connection between a person’s attitude toward the repayment of debts (i.e., credit score) and that person’s level of trustworthiness with respect to following through with commitments is firmly established.

The research further reveals that couples with a major gap between their individual credit scores are also more likely to separate than those with similar scores. Specifically, the Board found that where one person’s credit score is 67 points higher or lower than their significant other’s, the relationship is 24% more likely to dissolve than if the couple’s credit scores were within 66 points of each other.

So what can you do to improve your credit score and increase your likelihood of success in romantic relationships? Below are several simple yet effective tips.

  1. Designate a credit card to use for all your small monthly purchases, such as gas and groceries, and pay the balance in full each month. This shows lenders that you may be trusted to pay for the debt you acquire.
  1. Pay off your debt instead of rearranging it. While mortgage refinances and credit card balance transfers may temporarily relieve you of high interest rates or provide additional credit to work with, they often increase your debt-to-income ratio, which negatively impacts your credit score.
  1. Monitor your credit report and dispute any errors. The Federal Government enacted a law which allows consumers to obtain one free credit report every 12 months from each of the three credit reporting agencies.
  1. Negotiate any final credit card balances that are too high for you to pay in full. Write a letter to the company offering a payoff amount that you can afford, and request the payoff to be reported as “paid as agreed” to the credit bureau in order to prevent the cancelled debt being counted as income on your next year’s taxes.
  1. Don’t apply for credit cards from department stores and retail shopping centers just because you will then qualify for a discount purchase. Each credit card application shows up as a “credit inquiry” on your report, which signals to potential lenders that you may be obtaining new debt obligations in the near future. If you have to obtain credit in order to make your purchases, you may want to reevaluate whether the purchase is actually necessary and worth the possible damage to your credit.
  1. If you are going through a divorce, make sure that you track what debts and assets were accumulated before and during the marriage, as well as after the dissolution process began. This is important so that you are not shouldered with your spouse’s separate debt in addition to debt the two of you acquired during the marriage.

Mitigating the negative effects of a low credit score can be difficult, and it is especially important to protect yourself against bad credit resulting from a divorce. The experienced family law attorneys at Clawson & Clawson, LLP are here to fight for your rights and help you achieve a fair outcome that doesn’t shoulder you with unmanageable debt. Call (719) 634-1848 to set up a free initial consultation with a divorce attorney today.

Categories: Divorce, Credit Scores

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