When love goes bad…how to prevent relationship debt.
When love goes bad…Graham the 'Credit Corrector' shows how to prevent relationship debt.
12 November 2012
Being ‘in love’ is one of the best feelings in the world, but not one of the most practical states to be in. Sometimes personal financial values go out the window and people lose themselves in the process of adding to the 'relationship' and creation of 'us'.
But a leading consumer credit advocate, Graham Doessel warns it is important to think practically about joint finances for people to maintain their good name and their clear credit file when they take their relationship to the next level of commitment.
The former award winning broker and now CEO of MyCRA Credit Rating Repairs says when two different money 'personalities' combine, the potential for both to be financially damaged is greatly increased.
"Every day we meet people who need help with fixing credit rating issues due to no fault of their own really, but they have fallen under the financial shortcomings of a partner," Mr Doessel explains.
When people take out any credit together, such as loans, utility accounts, homes and rental properties, they become very reliant on the partner to keep up their end of the credit repayments.
Sometimes one partner ends up with a bad credit score, simply because the other person on the account has not kept up with repayments. People can be unaware their partner is generating defaults on their credit rating until it is too late.
"In many instances it's not until people apply for credit in their own right that they find out about the credit problems their partner has initiated. The relationship may even have ended years ago and the partner is still paying for it," Mr Doessel says.
Bad credit history can last for 5-7 years, depending on the listing. The most common type of negative listing is a default, and is placed by the creditor when an account holder fails to make payments past 60 days.
"Time and again we see people who have ended relationships but still have joint commitments together. These people find themselves in financial strife, unable to get home loans, credit cards or phones because they didn't continue to take responsibility for the joint credit until such time are their names were removed from the account," he says.
Mr Doessel says many people come unstuck by not asking the tough financial questions about their prospective partners early in the relationship.
How to Prevent Relationship Debt
1. Ask about your new partner's financial past. People will do what they have always done. If they have financial skeletons in the closet it is possible they will continue this behaviour in the future.
2. Ask what debts they currently have. This will give you an indication of how they feel about money, and how much debt they consider normal to handle. Does this match with yours?
3. Talk about paying bills. Do they always pay them on time? If not, why not? This will give you a good indication of how this person regards money and credit repayments. Ring any alarm bells yet?
4. Ask what their financial goals are for the future. Do they match yours? If your new partner wants to blow all of their money on an overseas trip, but you want to save for a home - how will this work long term?
5. Verify their answers about existing and past debt. Ask them if you can see a copy of their credit file (and versa of course). A copy of your credit report is free every year from one or more of the credit reporting agencies in Australia. It will be sent within 10 working days.
Mr Doessel suggests if people are unsure of their new partner's financial compatibility, it could mean finances need to be fairly separate for a significant period of time.
"Your financial generosity now could become the very thing that is used against you if the relationship sours. Before you enter into any financial transaction, consider carefully how secure you would be if things did take a turn for the worse," he says.