Buzzfeed teamed up with Experian to help spread awareness around credit scores. It is an innocent video of engaged couples revealing each other's credit scores to each other. A little humorous and silly, but the impact is huge.
STOP! If you are getting married to someone, and you have made that commitment known by getting engaged, you should know each other's credit score. If you're reading without your significant other, go ask them if they know their credit score. If not, you both should find out ASAP.
Why is this so urgent? In the next five years, many of us will make a financial decision that will require a review of our credit history. Having bad credit could either hinder your ability to make that decision or change what could be a great decision (i.e. buying a house), to a bad decision (i.e. buying a house with a high variable mortgage interest rate). Knowing that you are planning to purchase a home five years from now gives you the ability to begin working on raising your credit score as high as possible. A higher score will give you favorable rates and could save you tens of thousands of the lifetime of your mortgage.
But you cannot do that if you don't know what your credit score is to begin with.
A credit score reveal is a great exercise that should be practiced by every engaged and newlywed couple (in case you haven't gotten to it yet).
The reason is twofold:
- A vast amount of marriages end in divorce. Many of them are due to financial struggles and disagreements. Knowing each other's credit scores is an easy way to drill down into each other's money management practices.
- As you think about your future, knowing where you stand now will help determine how workable your goals are.
For example: when you buy a car with low credit you have a high-interest rate (9%), when you buy with high credit your interest rate is 3%. For a $20,000 car, the difference in payments is $59 for a six-year loan.
Not a big deal right? If you have a child at around that time, and invested that $59 savings toward their college tuition for six years. Not making a single contribution for the next 12 years, the fund would be worth a little over $12,000. You would be $12,000 closer to your goal of helping your child avoid the heaping pile of student debt most of us are saddled with. Isn't that something worth considering?
Financial planning is all about getting clear on your goals and aligning your decisions with those goals. If your goal is to help your child pay for college, having low credit would hinder your progress towards those goals to the tune of $12,000.
What are your thoughts? Do you have any goals that are hindered by your credit score?