A credit score can be a dreaded 3-digit number that could be the key to either opening our doors or locking us in. Credit scores play a crucial role in all major financial crossroads including, but not limited to, (1) buying a house or a car, (2) taking out student loans, or (3) qualifying for that awesome rewards credit card you want. But can your credit score’s influence leak into other parts of your life? Research by Matthew Saxey, Dr. LeBaron-Black, and others would say yes![1] It turns out that the quality of your credit score may impact your romantic relationship in unexpected ways, including financial self-efficacy and financial deception.
People with good or excellent credit scores (670+) often have higher levels of financial self-efficacy.1 Financial self-efficacy is the confidence that someone has in themselves to learn and follow financial plans to responsibly manage their finances. This includes things such as budgeting, making payments on time, or learning how to pay off debt in a realistic manner. Having a higher level of financial self-efficacy can help alleviate financial stress for not only you, but also for your relationship.1 When you feel confident in your own financial management, you are more likely to be open with your partner about your current financial situation—such as current debts—and future financial goals like buying a home; this can help improve relationship satisfaction. Being able to communicate well about finances can open doors in a relationship as couples are better able to share future plans and hopes.
Studies have found that people with lower credit scores are more likely to engage in financial deception within their romantic relationships.1 Financial deception is when one or both partners hide money, purchases, or debt, and are often untruthful about other financial matters. This can negatively impact relationships due to the lack of transparency and honesty between partners, such as lying about debt, income, or credit score. I’m not suggesting that this information should be shared on the first date, but when building a life together it’s important to be open with your partner and not be deceptive about financial matters. Not sharing this information in a committed relationship may also decrease the amount of trust shared between partners.1 Building a life together requires trust and honesty, and not financial deception.
So, what can we do about it? Does my credit score mean I’m doomed to end up in an unhappy relationship? Not quite. When we examine the underlying behavior of the couples in Saxey’s study, we find that creating positive financial habits and having healthy communication makes a big difference in these couples’ outcomes.1 Creating positive financial habits and developing high quality communication not only helps improve a couple’s financial situation but can improve their relationship satisfaction.[2]
Although it is normal to have growing pains when it comes to discussions about finances, being on the same page as your partner can have a significant impact on your overall relationship satisfaction.[3] Getting there can be challenging but certainly worth it.
Takeaways
1) Take Finances into Your Own Hands
Be proactive about learning how to manage your finances and be consistent with your application. Finding financial habits that help you and your partner get where you want to go can be a game changer. You can take a class, or download a budgeting app to help you develop positive money management skills. My personal favorite that is free to use is Credit Karma.
2) Improve Your Credit Score
If your credit score is low due to not having much credit history, one potential way to improve your credit score is to get a credit card. You can co-sign with someone you trust and/or talk to your bank and see what you are eligible for. Ensure that you are making payments on time each month and keeping your credit utilization percentage (how much of your credit limit you are actually using) low—these have a huge impact on your score. Read more tips for improving your credit score here.
3) Honesty is the Best Policy
Be honest with your partner about where your money comes from and where it is going. One of the best things for a relationship when it comes to finances is simply being on the same page.3 You can read more here for additional ideas on how to approach these financial conversation.
4) Meet Where You Can
If you and your partner aren’t on the same page with finances, try to understand where the other is coming from and find a way to manage finances that works for both of you. Creating a financial plan together that works for both of you will require compromise but will ultimately benefit both people.
References:
[1] Saxey, M. T., LeBaron-Black, A. B., Totenhagen, C. J., & Curran, M. A. (2023). More than a score? Indirect associations between credit score and romantic relationship quality in emerging adulthood. Journal of Financial Counseling and Planning, 34(1), 55–67. http://doi.org/10.1891/JFCP-2022-0018
[2] Addo, F. R., & Zhang, X. (2020). Debt concordance and relationship quality: A couple-level analysis. Journal of Family and Economic Issues, 41, 405-423.https://doi.org/10.1007/s10834-020-09687-8
[3] Baryła-Matejczuk, M., Poleszak, W., Filipek, K., Cwynar, A., & Żółtak, T. (2023). In the quest for effective factors of satisfaction with life: Insights from intra-couple interaction and financial management variables. Plos One, 18(3), e0279079. https://doi.org/10.1371/journal.pone.0279079