If you have a credit card, a car loan, or a mortgage, you have a credit score. This score, either high or low or somewhere in between, informs lenders of how well you manage current and past credit opportunities. Do you pay card account balances off routinely? Are you on time with your monthly mortgage payments? Your score gives a snapshot of your credit history, with the score moving up or down based on your creditworthiness. It considers the open accounts, as well as closed or fully satisfied lines you’ve had in the past. Your credit score is a compilation of all these various forms of credit.
High(er) Credit Scores are Key
Credit scores, which range from 300 to 900, depending on the score issuer are broken down into groups poor, fair, excellent and reflect the borrower’s past behavior. A minimum score of 700 or higher is commonly required by lenders. Consumers with scores below that threshold routinely face credit application denials, or significantly higher interest rates in the event that they are approved, which increases the cost of borrowing. One of the outcomes of our Daily Money Manager services is that it helps you earn or maintain your excellent credit score.
Elsewhere – Where Your Credit Score Has Impacts
Depending on the state in which you live, auto insurance companies are allowed to factor credit scores into their rates. Due to this allowance, insurers are more likely to perceive individuals with lower credit scores as an indicator of other, more risky behaviors, including driving habits and speeding.
If your credit is checked when applying for a new job, your score could negatively impact your potential for landing your new role. This is especially prevalent when the job entails having access to company funds, government work, or those working in the medical field. Due to the Fair Credit Reporting Act (FCRA), a potential employer can check your credit only if you’ve given them written consent.
Another issue regarding credit scores is limited access to credit due to an inherent racial bias. The Equal Credit Opportunity Act was passed in 1974, which did not allow scoring systems to use any data points that pertained to sex, race, marital status, national origin, or religion. Even so, according to the data, generational wealth gaps continue to hinder Black and Hispanic borrowers, along with other minority groups. As a result, it’s more difficult for them to achieve or maintain high credit scores.
Does Marriage Help or Hinder Credit?
You might be interested to know that despite having an impact on credit scores in the past, marital status no longer has any bearing or affect on your credit score whatsoever. However, being married, whether newlyweds or in a long-term union, can have an impact on lending outcomes when individual credit scores are considered together for one loan.
When a married couple applies for a mortgage or refinances an existing mortgage, the interest rate depends on if the loan is applied for in two or just one name. If two parties apply together, lenders consider the credit scores of both parties. It is an unfortunate reality that the lower-scored partner dominates the process, and the ensuing result is a higher interest rate. You’ll want to work with a lender who understands that this process is significant if one partner carries any large debts, or student loans, or has a weak credit history.
One big reason why spouses or partners might have a significant gap in their credit scores is that for older couples, the man traditionally carried most (if not all) of the credit accounts. This leaves their wives little to no credit history and consequently, she has a lower credit score. When the partner with the majority of the credit history precedes their partner in passing, then the survivor is often impacted when credit lines are moved into their name. The new limit may be unchanged, or more likely much lower, due to their less robust credit score.
Regardless of why your credit scores are different, you don’t have to compete to have the higher score, however, working toward raising a low credit score is always wise.
At Organized Instincts, our team of daily money managers will help you better understand how your credit score fluctuates over time. Schedule a no-obligation conversation today and learn how you can enjoy the benefits of an excellent credit score, thanks to our team, and enjoy a stress-free day at the nearest amusement park.