Julie, a 20 year old full time faculty student, married Bert, a twenty four year recent medical clerk. On the day she signed their wedding license, her credit report score began to worsen.
Julie knew Bert had been previously married, and though that wedding had lasted only 2 years, it had been long enough to spread a unhealthy credit virus onto her and Bert’s joint credit report score.
Bert’s ex-spouse, Camille, already had delinquent credit before she married Bert. And, she had continued being delinquent throughout her marriage to Bert and after the divorce. Unbeknownst to Bert, Camille’s unhealthy credit had passed onto him when he married her, and then passed on to his new bride, Julie.
Why? Because when couples marry, assets; also debts, become joint. Unfortunately, divorce does not nullify financial obligations, even if a judge specifies during a divorce decree that spouse is responsible for re-paying that bills.
But this is often simply the start of Julie and Bert’s bad credit horror.
Julie had racked-up several thousand dollars in student loans. Once she married Bert, she dropped out of faculty which action initiated the loan repayment period. Like Bert, she additionally contains a full time job, but it’s laborious to pay the debt as a result of of different bills.
Within the divorce decree with Camille, Bert retained possession of the automotive which still had loan payments due. Camille received all the furniture in the divorce settlement. Bert and his new bride, Julie, had to purchase new furnishings for his or her apartment. Additionally, they’d spent a lot of money on their wedding and honeymoon. Together they had a heap of debts to repay, and a few bills were being paid late. Their credit score continued to dive.
They got an idea. They’d balance transfer Julie’s mastercard and Bert’s mastercard to a brand new mastercard that offered 0 interest balance transfers for the primary six months. Unfortunately, since their credit score was unhealthy due to excessive debt-to-income ratio and late payments, they were rejected by the card issuer.
Bert refinanced his car to lower the monthly payment. Since his credit was unhealthy, he had to increase the term (repayment period) of the loan a further 2 years and at a higher interest rate than the original loan, but he was ready to get $1,000 in equity. He and Julie used the $1,000 to compensate for their bill payments.
Six months later, now that they’d caught up on their payments that conjointly lowered their overall debt-to-income, they reapplied for the zero intro balance transfer credit card and were accepted. They transferred their credit cards to the zero intro card.
Three months later, they received a letter from the new card issuer that stated their zero interest period had been terminated. Why? Because Julie and Bert had mailed an auto loan payment some days late. The late payment was reported by the auto lender to a credit reporting agency that lowered their credit score. The new card issuer’s terms required Bert and Julie to keep up (or improve) their credit score by making all payments (not just payments on the cardboard) on time. Additionally to terminating the 0 interest period, the issuer also increased their APR rate.
Other than ordering credit reports before wedding, what could Bert and Julie have done differently to avoid the bad credit virus?
Before divorcing Camille, Bert should have made positive all debts assigned to her would be repaid, and repaid on time. Clearly, the only sure approach to own done this would are for Bert to create the payments himself. He could have refinanced his auto once divorcing Camille, used the equity to payoff her debts, and then have her repay him. He should have also ensured that every one joint accounts with Camille had been closed to stop additional charges.
Julie ought to have continued her full time student status; not only to improve her career opportunities, but conjointly to delay the student loan reimbursement requirement.
And there are obvious things Bert and Julie might have done, like shopping for used furniture whenever that they had accessible cash rather than charging purchases for new furniture on their credit cards. Additionally, they may have spent less on their wedding and honeymoon.
Wedding and joint debts can indeed unfold dangerous credit sort of a virus. Do not rely on a divorce decree to separate you from bad credit.
