When you’re planning to move in with your long-term partner, you may have romantic visions about how it will play out: pancakes every morning, sleeping until noon on weekends, shopping for couches together. But what you may not have factored into your fantasies is that you’ll also be depending on each other financially, perhaps for the first time. Your personal credit and savings, as well as your partner’s, may be on the line.
If you want to avoid money miscommunications down the road, ask your partner these questions about credit first:
1. What’s your credit philosophy?
You’ll have a much easier time understanding your partner’s strengths and weaknesses when it comes to managing credit if you ask how he or she thinks about money. According to a 2011 paper published in the Journal of Financial Therapy, people generally think about money in four ways: money avoidance, money worship, money status and money vigilance. All of these “scripts” come with potential pitfalls. Go through this list with your partner and choose the script that best defines your own feelings about money:
Money avoidance: The thought of checking your credit report or your bank account balance scares you.
Pitfalls: If you distance yourself from money, you may not catch fraudulent charges on your accounts, or you could end up with overdraft fees.
Money worship: You think that having more money (or, maybe, more credit cards) can fix everything.
Pitfalls: By focusing on what you don’t have, you may be overlooking other issues, like your habit of overspending.
Money status: The more money you have, the better you feel about yourself.
Pitfalls: Your self-esteem may take a dive if your income is more modest. And if you don’t have a lot of money but want to project the image of status, you may end up in debt.
Money vigilance: You pay all your bills on time and avoid getting into debt.
Pitfalls: You may be nervous about getting a credit card, and that could make it difficult to build a strong credit history.
2. What’s your credit like?
With several major issuers now providing free credit scores to consumers, it’s easier than ever to pull your credit score and share it with your partner. Do this before you start applying for places to live so you have time to improve the scores before sending in applications.
If your partner has a credit score under 630, talk about why. Be helpful, not judgmental. Does he or she have missed payments, an account in collections or a tax lien? Help your sweetie go through his or her credit report to find the problems. From there, discuss what you can do to boost your scores together.
Once you know how your honey handles money, ask yourself if you’re ready to take on financial obligations together. If you don’t trust your partner with money, you may want to hold off on merging your finances. Likewise, if you feel like you can’t trust yourself to share credit responsibly, assuming a joint debt with your partner right away probably isn’t a good idea.
3. How much debt and income do you have?
When you know about each other’s debt and income levels, determining what kinds of new digs you can afford is much easier. To get approved for a conventional mortgage, your monthly debt obligations, called a debt-to-income ratio, generally needs to be less than 36% of your gross income. And if you’re renting, a general rule of thumb is that your monthly payments shouldn’t exceed 30% of your gross monthly salary.
When your looking for places, consider what you’d be able to afford in the event that one of you had to take on all the monthly expenses temporarily. If you don’t have much of an emergency fund between you, or if you have a lot of debt to pay off, you may want to look for a less expensive place. If you move into a house you can barely afford, you may end up leaning on your credit too heavily, and that could hurt your score.
4. Are we going to split things 50/50?
Just because you’re moving in together doesn’t necessarily mean you’re going to divide all your expenses evenly. If you have different incomes and debt loads, it may be easier to split things proportionally. In some cases, sharing credit or opening a joint checking account, separate from your own personal accounts, could make it easier to split expenses. Alternatively, you could take turns covering expenses.
If you plan to share property — for example, if your partner owns a car and says you can drive it — make sure your insurance policies cover both of you. You’ll likely have to pay a slightly higher premium if you want to add your name to the coverage. By limiting your financial liabilities with insurance, you’ll be less likely to face costly court judgments.
5. What if we break up?
When you’re living together and sharing finances, breaking up becomes a lot more complicated. Knowing what to do in case the relationship doesn’t work out can protect your credit and your savings account. If you’re thinking about signing a yearlong lease, for instance, start by reviewing the terms. In some cases, you may not be allowed to sublet your place to other people, and breaking your lease may cost you plenty.
You may also want to agree on how you’re going to divide your money if you’re sharing accounts and credit. If you have a joint account, agree on how to split it early. If you added your ex as an authorized user on your card, remove his or her name. If you’re jointly liable for a credit card, close the account. And if you applied for a loan together, decide who will be responsible for the remaining balance, and refinance it under that person’s name.
Lay the foundation
By communicating about credit regularly, you’ll be more prepared for the next step in your relationship, whether that’s getting married and having kids, or saving up to travel the world. The real beauty of talking about credit with your partner and planning ahead is that you can focus more on what really matters to you — like sharing pancake breakfasts every morning and sleeping until noon on weekends.
This article was updated July 1, 2016. It was originally published March 11, 2015.