04 Sep 2013
Edition: Page 26 - 27
So you have finally found 'the one' and have decided to walk down the
aisle. But before you tie the knot, make sure your partner's credit
history is not in shambles. Financial compatibility is something that
often goes ignored amid the grand wedding preparations.
For many families, the basic criterion to go ahead with a wedding is
still the compatibility of horoscopes (if you are a Hindu) or the
familial statuses. When two people vow to take each other in sickness
and in health and in all other important aspects of life, why should
the financial well-being of the parties involved be neglected?
Marriage is an important milestone in life.
So it has to be carefully planned for. Says Arun Thukral, managing
director, Credit information Bureau (India): "It is imperative
that you know about the financial health of your would-be spouse.
It does not imply that you consider marrying somebody solely on the
basis of the income earned, but it is essential for you to know how
well your prospective spouse is managing finances or for that matter,
credit." Of course, there is change in the air.
The current generation is relatively more cautious when it comes to
taking big steps in life and that reflects in their matrimonial
choices too. Says Kaushik Tiwari head of marketing of
Bharatmatrimony.com, "We have noticed that people look for
increased financial stability and credibility when they search for
potential partners and this is especially true for girls."
The harsh truth.
If both partners' credit histories and financial habits don't match,
it will be an uphill task to build a financial future together.Say.if
your prospective spouse has bad financial habits, it will be foolish
to merge accounts or give access to your credit, like shared credit cards.
The truth is, a flaw in the financial fitness of your spouse can
haunt you especially when you apply for credit after marriage.Lenders
do a thorough background check to see whether the information provided
by you is true and also whether you have the ability to repay the loan.
They will also look at your credit information report prepared by
various credit bureaus. Once you close a credit account, such as a
credit card, home loan, car loan and so on the details about how you
handled the repayments stay on your credit report.
If you have applied for a loan jointly, and your spouse has a low
credit score, this can prove to be a roadblock in getting the loan
sanctioned. Even if your application is approved, you may have to pay
a higher interest rate because of your spouse's bad credit record.
Says Mohan Jayaram, managing director, Experian Credit Information
Company of India. "When the lenders share information with us
that you and your spouse have a joint loan, or you are a guarantor to
a loan, the said account is flagged accordingly in the credit
information report as joint, guarantor, individual and so on."
Before you co-sign anything with your spouse, do understand that a
co-signer is fully responsible for repaying the debt if the primary
And the default will also reflect in your credit report since you are
also a part of it.
Take the reins. If you are more disciplined among the two of you,
take charge of the money-related aspects. Take over the payment of
bills and the management of household finances.
"It you have issued an add-on card the primary repayment
liability rests with you, and, hence, you need to ensure that the card
is used within your repayment powers and the bills are paid in
time." advises Sanjay Patel managing director and CEO. Equifax
Credit Information Service. Another way to ensure that your
spouse's bad credit doesn't hamper your chances of getting a loan is
to apply for it individually.
But in that case, your income and other assets in your name should be
substantial enough for you to qualify as a single loan applicant.
However, if you are applying for a hefty loan, such as a housing loan,
as a single applicant getting the loan could prove to be difficult.
Again, even if the loan is approved, it could be a small amount,
based solely on your merit.And God forbid, if there is a legal
separation tomorrow and the property or the vehicle you are paying the
EMI for goes to your spouse, you will still be responsible for keeping
your credit report clean by paying up till the tenure ends.
Therefore, it is always better to talk about and understand your
partner's money habits before the nuptials as the most common factor
driving most divorces today is money. Says Jayaram "Discussing
past and present financial commitments with your spouse is a good way
to start your new life together.
You could start by ordering copies of your credit information reports
and going through them together." No credit bureau will give you
your partner's or anybody else's credit report.You will have to ask
your partner to share his or her credit report with you to take a look.
Path of redemption.If you think your chosen partner is the one for
you.his or her credit history alone should not be a deterrent in
making the commitment.Credit report and credit scores are dynamic and
change in accordance with the credit behavior of the borrower.You can
help your partner in cultivating financial discipline and improve his
or her behaviour gradually.According toThukral. "Once the
borrower has paid all the delinquent Elvfls and has started regularly
paying the instalments on the loan, his credit report will improve and
relied the regular payments accordingly." But this may cost you a
lot of time and effort.
Once you have decided to tie the knot, you can help your would-be
spouse pay his or her balances or transfer your spouse's debt to one
of your accounts with lower interest.But make sure that in doing so it
doesn't tarnish your credit record. Unpaid bills mainly bring down
your credit score. Says Patel, "keep your mobile number and
address updated in the lender's records to ensure thai all transaction
alerts and reminders are received on a regular basis and spending can
be checked before it is too late." He adds that there are
attractive options of converting large purchases to EMIs with lenders
and can be used for ensuring that repayments are regular and on
time.It's a pity how all those happily-ever-afters never once
mentioned a thing about bad credit!