Money and love are a strange mix.
NerdWallet partnered with OkCupid to study how the dating site’s users answered questions designed to help them find a good match. When it came to “money/wealth” in a relationship, about 36% said it isn’t important at all. That’s a lot — but 43% said it’s at least somewhat important.
And there’s evidence that a good credit score — which isn’t the same as wealth but is a gauge of financial reliability — makes you a hotter romantic prospect. A 2015 Federal Reserve study found a positive link between credit scores and the likelihood of forming a stable, committed relationship. In addition, people with higher credit scores gravitated toward each other, while a mismatch in credit scores was highly predictive of separations.
Yet the things you do for love can damage your highly attractive balance sheet. Here are some times when a generous impulse could end up hurting your credit score — and what you might want to consider doing instead.
1. You overspend
Trying to impress somebody or feeling an obligation can lead you to put more on a credit card than you can pay off when the bill arrives.
Particularly when you’re talking romance, it’s easy to justify spending. No one wants to look cheap or thoughtless or uncommitted, at least while love is new. It’s Valentine’s Day, it’s his birthday, it’s your three-month anniversary.
This extends beyond romantic partners to family bonds. “People can get themselves in all sorts of trouble in the name of love,” says psychologist Gary Buffone, the author of “Choking on the Silver Spoon: Keeping Your Kids Healthy, Wealthy and Wise in a Land of Plenty.” “One of the most common examples are parents and grandparents who fall prey to the notion that giving things conveys love, when in fact it just ends up conveying things.”
What you can do instead: Consider the would-be recipient. If it’s a child, you can model the behavior you hope he or she will someday adopt. Buffone says kids are often quicker than adults to understand that love is shown by involvement rather than spending.
If the person you want to impress is an adult, be sure you can truly afford what you’re thinking of spending. Candlelight dinners come in a variety of price ranges — and not every date has to be dinner (Everyday Cheapskate offers several ideas for budget-friendly dates).
2. You take the financial reins
We know you mean well. Maybe you’re good with money and your partner never has been. It can seem logical to do the jobs you’re good at; say one person is a great cook and the other is comfortable fixing plumbing leaks. But money and credit are different.
Money can represent control, and in a romantic relationship it’s unhealthy for one person to be in charge. And if the person you love is your adult child, taking care of money for them instead of with them indicates you don’t think he or she is capable.
What you can do instead: Financial therapist Amanda Clayman suggests examining your motivation. “Nurturing is good up until a point; then it becomes enabling,” she says. She suggests thinking through the possible consequences, such as someone remaining financially dependent, before you decide how to help.
3. You co-sign
Maybe it’s your kid or your significant other, but somebody can’t get a loan, credit card or apartment without your signature. You trust that he or she is good for it.
It may be that he simply hasn’t built a credit score yet, and you want to give him a boost. It may be that he’s made credit-denting mistakes in the past, but you feel relatively confident he won’t repeat them.
But co-signing isn’t simply attesting to the borrower’s good character; it’s agreeing to pay back every dime owed if the borrower doesn’t. And it gets worse: You might not even know if the borrower falls behind on payments. (See “What you need to know about co-signing.”)
Even if the borrower pays as agreed, co-signing could limit your access to credit because you’re putting yourself on the hook for the full amount, and the co-signed loan shows up as debt you’re carrying. Harsh as it may sound, if you wouldn’t feel comfortable taking out an obligation of this size for yourself, you shouldn’t co-sign for someone else.
What you can do instead: If you’re considering co-signing strictly to help someone build credit, you could instead give that person the money to deposit for a secured credit card or a credit-builder loan, or co-sign the smallest personal loan you can get.
If you’ve read all our warnings and are going to co-sign anyway, we have two last bits of advice:
- Be sure that you’ll have some way of knowing whether payments are being made on time.
- Find out if you can be released as a co-signer after a certain period, and get that in writing.
4. You make your loved one an authorized user
You love and trust her, she loves you — what could go wrong?
- As an authorized user on your credit card, she may have access to your entire credit line but no legal responsibility to repay it.
- It might not help her unless she’s starting from scratch.
- While you can remove an authorized user from your card at any time, you’re still responsible for the debt that user already incurred.
If you want to go this route, have a clear understanding of how the card is to be used and how much is to be charged. Check credit card usage online or set up alerts to let you know when the card is used.
What you can do instead: If your goal is strictly to help your loved one build credit, a secured credit card could be a better way to go, and it won’t grant access to your entire credit line.
5. You try to mend a broken heart
Sometimes, the person you want to pamper is you.
We’re all for being good to yourself. But failing to differentiate between a spirit-boosting treat and a budget-busting splurge can cost you thousands of dollars and hurt your credit.
If spending “is the only way a person knows how to pamper themselves, trouble can’t be far behind,” Buffone says. “If a little love (spending) is good, then a lot is better, and there goes the budget or credit scores.”
When you mask breakup spending as self-care, it can seem practically virtuous to book a cruise you can’t afford.
What you can do instead: “It’s all about balance,” says NerdWallet columnist Liz Weston. “There are plenty of ways to treat yourself that don’t cost a fortune and that will still allow you to put aside money so that your future can be a treat as well.”
Show the future you — the eventually retired you — a little love, too. It wouldn’t be such a terrible thing to leave the workforce with money in the bank.
Updated Feb. 7, 2017.