New Dating Question Revealed: I Love You, How’s Your Credit?

Don’t get caught carrying your relationship’s financial baggage . How many credit points is your relationship worth?

A broken heart isn’t the worst-case post-break-up scenario facing couples today. A new survey conducted by LeaseTrader.com says an over-loaded budget and the potential of a shattered credit score are plaguing those newly single or on the verge of being single again. The reason for these financial crises: joint financial commitments.

“When you’re building a relationship, building joint credit feels like a natural rung on the ladder,” says Dan Danford, principal and chief executive officer at Family Investment Center in St. Joseph, Missouri. But if the romance sours, that same joint credit can become the backbone of financial devastation.

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Scores of those newly divorced, separated, or uncoupled who have co-signed for a car, share a lease, have joint plastic tucked in their wallets, or are co-owners of a dog are often left holding most or all of the financial baggage for these things after a break-up. And those bags are usually pretty heavy. “That means someone may be stuck trying to make payments he or she can’t afford,” says Danford, and that can impact your credit.

Even though few people enter a relationship with the intention of ruining their new mate’s credit, many find out that’s the unfortunate and very real outcome. “Beyond not being able to pay your own bills, an ex not paying his or her share of a joint account can be especially dangerous,” says Danford. “You may not know your ex is failing to pay until you’re being served a summons or being hounded by collection agencies.” Which means months of late or missed payments have already been reported to credit bureaus and lowered your credit score.

According to the survey, the most common things a person is likely to be left holding the bag for are rent/mortgage, car loan or lease, credit card debt (major cards as well as merchant accounts), property damage/repairs, and pet responsibility.

“When you’re happy and in love, these are all things you don’t expect your partner to leave you 100 percent responsible for,” Danford says. “But if the relationship turns sour, these are the most common financial responsibilities ex’s fight over or bail on.”

Protect your love life, and your credit score

Danford says, “The best way to protect your credit after a break-up is effective communication.” Make sure you’ve told everyone who needs to know that you’re now single and what you’re responsible for – and, most importantly, what should not fall under your responsibility. “That will eliminate a lot of the confusion and potential plunging of your credit.”

In the event of a divorce, the divorce settlement legally covers things jointly owned. “But that doesn’t mean everyone in the world knows about it,” Danford says. “And the decree’s power is only good if creditors know it exists.”

To thwart confusion if years from now both names still appear on the property’s mortgage or deed, notify all lenders of the split and ask what kind of formal notification is necessary to properly re-title accounts or assets. Be sure to contact the local recorder of deeds to file any necessary paperwork to amend the title as well. “Close any joint credit accounts that have zero balances and notify all creditors, including any bank lines of credit, that you want to block any new charges,” Danford says.

Formally notify all three credit bureaus, too – Experian, Equifax, and TransUnion. “They each have a process for filing explanations or information, and it can’t hurt to have a written notification in your file,” says Danford.

After a break-up, contact your insurance agent regarding the beneficiary of any policies. “Insurance is contractual, and even if you no longer want your ex as the beneficiary, a policy will pay whoever is named the beneficiary,” Danford explains.

Preventing a problem

Married, single, or newly committed, your relationship status doesn’t have to knock down your credit score. Renee A. Hanson, senior financial advisor and private wealth advisor in Phoenix, Arizona, suggests that the best way to handle a financial meltdown is sidestepping one altogether. “Keeping credit accounts separate is really the best way to go.”

Ending your union isn’t the only reason to make sure you’re each responsible for a fair amount of the finances. “In the event one of you lose your job or are suddenly unable to earn an income, the other needs to be left ‘realistically responsible,’” says Hanson. That means being able to realistically pay the bills, not hoping to find a way to pay them. “Too often one partner thinks fair is a 50/50 split, while the other thinks fair means each takes their portion of the joint debt,” Danford says.

Hansen says that the idea of “fairness” can also be a double-edged sword. “Totally equal financial risk means sharing in all of the outstanding credit. That means equal responsibility even though there may not be equal ability to pay or equal income.”

To prevent from becoming a financially vulnerable partner, Hansen says, “Separate your financial obligations as much as possible, no matter how solid your romantic union is.” That way each of you is solely responsible for what’s reported to the credit bureaus under your own names. “Carry utilities in separate names, too,” Hansen suggests. “One can take the electricity, the other the cable and so on.”

Don’t forget to occasionally review how much each of you is responsible for. “Pick a time, like when you file your taxes, or your birthday, for an annual review,” suggests Hansen. And maintain open lines of communication about all finances.

However, if, a break-up does leave you carrying more than your fair share, experts say don’t despair. “Many creditors will work out payment arrangements after being given a copy of a divorce agreement,” says Danford. “And don’t forget credit counseling and consolidation is often an option.”

– Writer Gina Roberts-Grey contributed to this report