Financial Secrets in Marriage Could Lead to a Divorce of Debt

May 28, 2008

When you get engaged, you’re not just promising to marry a person; you’re also marrying their money habits, their debt, and credit history.  If you’re not careful, unknown money issues can not only ruin a marriage but sink you deep into debt.

Hiding Credit Card Debt
Here’s a sad story of a former co-worker whose life was turned upside down by his spouse’s debt.  I met up with him for lunch yesterday to catch up and couldn’t believe the story he had to tell.

His wife had 50K of credit card debt coming into their marriage that she didn’t tell him about until several years after they were married.  She was only making minimum payments so over the years the interest mounted and the debt continued to grow.

He had owned a home prior to the marriage and they finally they decided to tap into it’s equity and take out a loan to pay off most of her debt. A few days later he comes home to find her packing her bags and on her way out the door.  Of course he didn’t share this story with anyone for quite a while since it was so painful and embarrassing but now happily he’s met someone new and is moving on. 

What’s the morale of the story?  Find out about your future spouse’s finances before you get married.  To help you do that, here are some questions to ask, courtesy of Real Simple:

Ten Romantic Debt Questions for Your Fiancé

  • Do you use credit cards for everyday expenses?
  • Do you pay your credit-card balance in full each month?
  • Have you ever maxed out your credit cards?
  • How many credit cards do you have?
  • What are your debts?
  • Have you looked at your credit reports in the last year?
  • Did you ever require a cosigner for a loan?
  • Have you ever been put into collection by a creditor?
  • Are you a cosigner on anyone else’s loan?
  • Do you have any tax or other liens pending?

These questions are obviously not very romantic but they’re definitely necessary things to ask.  Depending on your fiancé’s personality you might handle them in different ways.  It might be easiest to just sit down and go through them all straight up or you might have to slip in a carefully worded question here and there during the course of conversation. 

Here are some other finance questions the article suggests asking:

  • Do you have a savings or checking account?
  • Do you balance your checking account each month?
  • Do you do research before making major purchases?
  • Do you have a budget or a spending plan?
  • Do you track your finances? How often?
  • Are you aware of all your benefits at work?
  • Do you have life insurance?
  • Do you have health insurance?

Of course some of these things you might find out over the course of time as you get to know someone. However you do it, make sure you get these questions answered, I know my friend sure wishes he had.

Checking Their Credit History
If you’re worried that your fiancé is holding back information you could dig a little deeper. Not telling you everything is probably a bad sign for future marital communications but if you’re determined they might be the one you could always do some more research.

If you know their full name, social security number, date of birth, current address, and previous address you can probably pull your future spouse’s credit report to do some double checking.  Be aware checking their credit report without their permission can potentially get you into some trouble:

“Anyone who obtains a copy of someone else’s credit report under false pretenses can be fined substantially and jailed for up to a year.

Only businesses or individuals with a “permissible purpose” can access your credit report. “Permissible purpose” is defined in Section 604 of the Fair Credit Reporting Act (FCRA).“

Then again, if your fiancé is willing to throw you into jail for checking their credit history, probably a sign you don’t want to marry them.

How to Build Credit History
What if your future husband or wife doesn’t have any debt but they don’t have any credit history at all?  This happened to us, when we went to get a loan for our home my wife’s lack of credit history affected the interest rates we were eligible for. 

We ended up putting both our names on the title but only mine on the loan so that we could get a better interest rate but we wanted a way to help build her credit profile.

Our financial planner showed us a pretty slick way that worked wonders for my wife’s credit.  She put $1000 into a 12 month certificate of deposit at our local bank and then used the CD to get a secured loan from the same bank.

We setup our checking account to make automatic payments on the loan so she had a year’s worth of on time loan payments on her credit report. Then after 12 months we took the money out of the CD and paid off the loan.  The interest we had earned on the CD helped pay for most of the interest we had paid on the money we borrowed.

Marriage Money Summary
Get to know your fiancé’s money baggage and habits or they may come back to make you miserable, divorced, and in debt in the future.

Ben

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Ben

Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn’t like the other kids… His addiction to personal finance has paid off for his family and now he’s helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.


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Comments

9 Responses to Financial Secrets in Marriage Could Lead to a Divorce of Debt

  • Been There

    I would never, ever pull a credit report on someone. 1 – It is illegal, you should be thrown in jail, regardless of the circumstances. If it is so necessary, hire an attorney and have just cause.. 2 – if your future partner isn’t sharing this information willingly then you should not be married and if you are married, you need counseling because often the problem is much deeper than just “finances”. As much as everyone wants to believe it’s just about money it’s often about power in a relationship. Pulling a credit report on a spouse is the equivalent of a parent “catching” a child smoking. I lived this. I married a partner, not a parent to watch over me, dictate and criticize while having hundreds of thousands in the bank yet making us live on Wonder bread and Chicken. What’s next, pulling a medical history check as well? Making sure your spouse swallows a birth control pill by a mouth check because you agreed you don’t want children? This is the most absurd advice on marriage I’ve seen. Do you wave the credit report in front of your spouse if there is a questionable item? Yes, protect yourself, but I think everyone who responded positively to this article, including the author needs to evaluate your personality and position in your marriage. As a married woman who has ironed out major financial problems on both sides, I still firmly believe that if a fiance pulls a credit report without telling me – I would have no problem throwing them in jail. Look deep inside yourself first.

  • kitty

    Something Suze Orman suggested on a show: include clause “I am not responsible for my spouse’s credit card debt on any credit card taken in my spouse’s own name”. Then if you find out your spouse has or opened a credit card, send a copy of the prenuptual agreement to the credit card company so that they know not to come after you. Wouldn’t work for joint accounts, but at least you can keep track of those.

    Wouldn’t help if you stay married, but if one spouse opens a card without telling it doesn’t say much about the marriage.

  • Van girl

    Very useful advice. I recently had a phone call from a bank to inform me that a joint account belonging to my partner and me had exceeded the overdraft. This came as a big surprise to me as I have never used this particular bank, or so I thought and secondly I haven’t set up a joint account with my partner or an overdraft facility!! So yes I agree it’s extremely important to know your partners spending habits.

  • Ben

    Good point Cheryl. It’s best if both spouses stay up on the finances. Kind of a system of checks and balances.

    Fico Queen, nice addition. You’re right bankruptcy can follow you around for quite a while.

  • Fico Queen

    I would add an 11th question – have you ever declared bankruptcy? If so, as his or her future spouse, it will affect every loan you apply “together” for.

  • Cheryl

    Great article, and very good advice. I think people should have to look at the other person’s credit report as a requirement for getting married, but I’m probably just cynical 🙂 I also know what it is like to be less-than-responsible with your money and not want to talk to anyone about it. When you’re in debt, your self-esteem usually isn’t at its grandest. At least I know that was true for me.

    I know you were covering items to discuss before marriage, but I wanted to remind everyone to keep your eyes open after marriage, too. If, after you discuss things with each other, you decide one person will “handle the money,” make sure you set up a time (weekly or monthly) where the other person reviews the statements/accounts. If your bank account balance is going down, and your credit balances are going up, you want to know that ASAP, not six months down the road (or six years!). Also, be sure not to be critical of your spouse if the money isn’t where you think it should be (unless there is some **really** good reason, of course), especially if you’re taking a hands-off approach. Be active in your “joint” finances, even if just as an auditor/mental and emotional supporter. You should know where your money is, in case of emergency and/or illness of your spouse.

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