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The Honolulu Advertiser
Posted on: Thursday, May 11, 2006

Merging finances for better, not worse

By Kathy Chu
USA Today

Gannett News Service

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PROTECT YOUR CREDIT RATING

• If you marry and change your surname, notify the three credit bureaus — Equifax, Experian and TransUnion — in writing. That way, the credit bureaus won’t mistakenly leave out accounts from your credit report that were opened under your unmarried name.

• Obtain free copies of your credit report annually by going to www.annualcreditreport.com or by calling 877-322-8228. You can get one free report annually from each of the three bureaus. If you want to check your credit report a few times a year, consider staggering your requests for reports from the three bureaus, so you won’t have to pay for any of them. If you suspect mistakes in your credit file, though, it’s best to check your information with all three bureaus at the same time.

• Check for errors on your credit reports and report the mistakes, in writing, to all three bureaus. By law, the bureaus have 30 days to investigate and respond to most disputed items. If a mistake isn’t resolved by the time you apply for a loan, bring documentation of the error to the lender. The lender isn’t required to give you a better rate, but it doesn’t hurt to try to get one.

• The widely used FICO credit scores range from 300 to 850; with a score above 700, you’re likely to qualify for the best interest rates available from that lender. If you’re jointly applying for a mortgage — many couples need both incomes to qualify for the mortgage they want — your partner’s poor credit score could bump the mortgage loan up to a higher interest rate.

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Merging households isn't just about having another warm body to help out with the dishes and laundry. It's about learning to build co-existing financial lives in ways that satisfy both of you.

For some couples, it means keeping all their money (except the household change bowl) separate. For others, it means joint everything joint bank accounts, joint credit cards, joint investments.

Most married couples, even if they start with all separate accounts, will end up sharing at least a joint checking account as their finances become more intertwined.

Here are some questions to consider when deciding whether, and how, to merge money with your mate:

  • Do you have similar spending habits?

  • Would you feel more unified if you had your finances in one pot?

  • Do you shudder to think your significant other will know everything you buy?

    "There's no cookie-cutter way to combine your financial lives," says Carrie Schwab Pomerantz, chief strategist for consumer education at Charles Schwab & Co.

    Pomerantz co-wrote the book "It Pays to Talk" with her father, Charles Schwab. In the book, she notes that in the early years of their marriage, she and her husband, Gary, maintained separate bank accounts. They paid bills out of his paycheck and invested the money she made. Eventually, though, they concluded it made more sense to combine their checking accounts. Today, they share most other accounts, including a primary brokerage account.

    This approach might not work for everyone. Some married couples, for instance, may be more comfortable with separate accounts so they don't have to answer to their spouse about every lunch out.

    And if you're living with someone but not sure the relationship will last forever, keep his or her name off your own accounts.

    Even unmarried couples who feel they're together for the long run should avoid merging money until they've spelled out in writing how assets will be divided if they split up. That's because unmarried couples don't have the same legal rights to claim assets that married couples do.

    Bad debt is another reason to keep your assets separate, and away from the grasp of your spouse's creditors.

    "You marry the person; you don't marry the obligations," says Howard Dvorkin, founder of Consolidated Credit Counseling Services, a debt-counseling group in Fort Lauderdale. "There's no reason why the financially responsible person should assume another person's liabilities."

    Before you combine any of your assets with another person's, compare credit reports. You're entitled to one free report a year from each of the three bureaus: Experian, Trans-Union and Equifax. Consider asking for a three-in-one report because each bureau has slightly different information.

    If you're married, here's one reason to put both spouses' names on a bank account, even if one person doesn't plan to touch it: When one spouse dies, the account will go directly to the other person and need not pass through probate. (Probate is the sometimes prolonged process by which assets are divvied up according to your will or, if you don't have one, by your state's laws.)

    Some couples find that having a joint credit card is a convenient way to pay for large household expenses, such as furniture. Just remember, though: With a joint card, you'll both be liable for charges even if you later decide to part ways.