Learn how your credit score is calculated and how you can increase it to get better deals on your mortgage, insurance, and more.
If the two of you are planning on refinancing your mortgage or buying a house with a loan in the near future it’s important to get a handle on your credit report and your scores.
Why Your Credit Score Matters
Higher credit scores typically mean you can qualify for lower interest rates, which can save you tens of thousands of dollars or more over the course of the mortgage so it pays to stay on top of credit monitoring.
Before we get into what a ‘good’ credit score is, I want to review how credit scores are calculated.
Examining How Credit Scores are Calculated
Many people, including myself years ago, use credit reports and credit scores interchangeably.
While the are related they are not the same. Quite simply, your credit scores are calculated based on what is on your credit report.
Your credit report is a record of your history of payments on your debts and helps lenders determine your credit worthiness.
You have 3 credit reports, one with each credit bureau – Equifax, Experian, and TransUnion.
Since they’re used for your credit scores, please check to make sure it’s accurate.
Checking Your Credit Report for Free
If you’re looking for a free option on checking your credit reports, you can use Annual Credit Report.
You’re entitled to reviewing all 3 of your reports for free. This is a completely free site, no trial, no membership sign-up.
Breaking Down Your Credit Score
According to FICO, credit scores are calculated by a few factors, weighted differently:
Your credit score from each bureau is a number between 300-850 that each of the credit agencies assign based on the information on your credit report. Since the information should be the same across the board, your scores should be quite similar, but that’s not always the case.
Good Credit Scores Save You Money
Credit scores range from 300 to 850, with many people around 600-700. If you’re looking for a minimum to work for, then 720 or better is something to shoot for.
When I was checking FICO to see what interest rates for mortgages you can get based on your credit scores, here’s what it came up with:
I want to mention, while you can get your credit reports through Annual Credit Report, you can not get your credit score.
You can use free option like Credit Sesame to get a credit score using data from Experian updated monthly.
The free membership (no credit card required) allows you to see your credit score and you can also get suggestions on ways you can save money on your finances, like mortgages or credit cards.
One of the most helpful things the two of you can do to strengthen your marriage and finances is sit down and be open with one another about your money.
Unfortunately many couples allow their fears about how wrong it could go stop them from doing this.
Building Wealth Together
This lack of communication can cause huge problems so if you haven’t already, make some time this week to discuss this with your husband or wife.
How do you get started? What should you discuss with the first talk? Here are ideas that I believe can help both of you be productive and reduce money arguments.
Be Upfront with Each Other
Honesty is the best policy when it comes to finances in a marriage. That means sharing all the relevant numbers and information with one another.
Financial infidelity can be emotionally devastating to a marriage.
Though not the most pleasant of activities, both of you will need to review the debts you have on a regular basis.
From college loans to car loans, credit cards and any other debt you have, it’s important that both of you know how much you owe.
This helps you create a realistic budget that will get you out of debt rather than having you two spin your financial wheels.
Create Goals Together
Okay so you know where you’re starting out from, but where are you two heading towards?
When creating financial goals, start off with dreams. After all, money is simply a tool. You can use it to achieve your dreams or you can waste it. What do you two want?
You can start off by creating a list of goals you two wish to achieve in 1, 5, and 10 years.
Think about what you value as individuals and as a couple.
Do you want to eventually own a house in the country or do you want a condo in the city?
Do you want to not lay roots and travel?
Do you like to have some gadgets or do you want to save to go have unique experiences?
Do either one of you want to start a business?
Do you guys want kids down the road?
Asking these questions can allow you to build something together instead of making it up as you go. You also learn about each of your money personalities. Use this opportunity as a way to talk about the differences up front.
Play to Your Financial Strengths
There are many aspects to managing your money: spending, investing, debt reduction, savings, budgeting, and more. Mostly you and your spouse will excel in a couple of those areas.
As a couple, determine what those areas are, assign roles and responsibilities, and encourage your spouse in his or her respective duties.
My husband is great at finding the best deals on electronics. He does the research and stays alert for when the price is lower than expected.
After we discuss the monthly budget, I take care of the execution of it. We review everything on a monthly basis.
Thoughts on Talking About Money
When did the two of you first start talking about money? How did it go? Any advice for the rest of us?