Is it Risky to Marry Someone with a Poor Credit Rating?

If you want to keep your good credit rating then you might want to be careful about the things that you do. Or you may not really know much about credit ratings but want to know more. It is important to make sure that you are clear on what credit ratings are and why they are important and then you will be bale to make decisions such as the above, much more easily.

What is a Credit Rating?

A credit rating is something that some people use to find out information about you. Each of us has a credit report and this will have information about us with particular focus on our finances. This will include things like loans and regular payments, any missed payments and some other information. It also contains details of anyone tied to you financially which means anyone you have joint accounts with. There is no official score as such though or rating, it is just a list type record and it is up to those accessing it to decide on what they think about it and rate it in the way that they wish. This means that it can be tricky to know exactly what will be the best with regards to behaviour as we do not know exactly how we are being judged, but a common sense approach, putting yourself in the position of the person doing the judging could help you to think about what might look good and what might look not so good with regards to your behaviour with money.

Why is it Important?

It is important because there are various decisions that will be made based on your credit report. The first will be any borrowing that you want to do. Lenders want to see that you are reliable and capable of making regular payments. They will look at loans that you have had in the past and see whether you have paid those on time. They will also look at whether you make regular payments, perhaps for things like utility bills and if you can do that, then they will be more likely to feel happy that you will be capable of repaying the loan that you have applied for. Landlords may also look at the record as they will want to see whether you are capable of making regular payments to see if you will pay the rent, but they will also be interested in making sure you do not have too many loans, as they will want to make sure you have enough money left to pay them. Some employers will even look at your credit report. They are more likely to just use it for an address and ID check, but if it does not look good, they will not be impressed and for certain jobs it will be important. So you can see that it can have an impact on some big areas in your life and so it is important.

Should I Marry Someone with a Bad Credit Rating?

Marrying someone is often an emotional decision rather than a practical one. However, if it means that you will have financial difficulties it could be tricky. However, if you do not have joint accounts, then it will less likely to have an influence on you and if you are living with them anyway then it is unlikely to make a big difference. Whether you have a joint account with a partner or a spouse you will be treated the same it is only if you are living with someone that you are not in a relationship with – when you have flat mates, that their credit status will not reflect on you.

Is a Traditional Bank More Reliable?

There are many people that think that it is better to go with a traditional bank. They look at the names on the high street and think about the fact that they have always seen those banks around and therefore feel that they will be able to rely on them. They then might look at the names of some of the newer banks, perhaps the online ones and feel that they will not be able to rely on them because they are new and no one they know is talking about them. They may feel an immediate distrust because they have not heard of them and it could put them off using them. It is worth thinking about whether this approach is a good idea though. There are lots of different banks and some are older than others and it is good to consider them all when making financial decisions.

Newer and Less Well Known Banks Need to be Good

It is worth bearing in mind that newer banks have to take time build up their reputation. They are aware that people will tend to worry about using them because they have not heard of them and they will want to therefore work hard to be impressive. They will try to have a unique selling point which will make them stand out from others and they will also need to make sure that they keep their customers happy. They will need people to recommend them or to use them again or else they will not be able to succeed and therefore they will need to make sure that they are providing a good service and competitive products so that people will want to use them again.

Traditional Banks Have Brand Loyalty

With a traditional bank they have brand loyalty which means that they will have a lot of customers that have been using them for a long time and will therefore continue to use them. They will not think too much about what they need to do to hang on to customers or find new ones in the same way as a new company. Obviously, they need to be reasonable and stay fairly competitive but people are often prepared to pay more for a bank that they have heard of. Consider whether this is something that you do and whether it is actually something that you should be doing or whether you should be looking to see if a less traditional bank might be better for you to use. It is good to have a think and do a bit of research as well.

High Street Presence

Traditional banks tend to have high street branches. This might be a way that some people like to bank, but these days there are alternatives such as telephone and online banking, which many people will take part in. This means that it could be worth thinking differently to high street banking. There are many advantages of going online, such as being able to bank at any time, rather than having to wait for the bank to be open. Also, a high street premises costs a lot of money in rent and rates and if you use a bank that does not have this, they will not be paying out so much money and therefore this could mean that they have lower costs or offer more interest in savings. It is well worth investigating this, because you do not want to be paying out more than necessary or going without savings interest just because you feel that you need to be with a traditional bank.

What is the Best Way to Use a Credit Card?

It is a good idea to think about making sure that when you have a credit card, you use it to your advantage. They can be really handy but also really expensive, but there are things that you can do which will mean that you will be able to use one and not pay out very much money or any money at all.

Always Repay in Full

It is a good idea to make sure that when the credit card statement appears, that you always repay the whole balance. Then you will not need to pay any interest on what you have bought. You will then get the advantages of using a credit card for free. You may wonder what the point will be of getting one if you just repay it in full each month but it can actually be very helpful. It is a safer way to buy online because you get some free insurance so if the products do not turn up you can get the money back through the card issuer. It is also less likely to cause major problems if someone gets your details. If they get you bank details form a debit card there less protection and you can potentially lose all your money in your current account and possibly other linked account too but with a credit card, there are fraud checks and it is unlikely that you will lose much money at all.

Set up Direct Debit

If you want to make sure that you repay the full balance each month then it is wise to set up a direct debit to do so. This will mean that you will never forget and this is important. You could find that you are distracted or that you are not available to make the payment and then you will be charged, so it is much easier to set up the direct debit to do it for you. You do need to be careful though and make sure that there will be enough money available to pay for it. Try to make sure that you set up the direct debit on the day after you are paid so that you will have money available, but also be sure that you have not spent too much on other things.

Keep Track of Spending

It can be wise to keep a track of your spending to make this a lot easier. Some people choose to keep a spreadsheet and note what they are paid and what bills they need to pay and things like this on the spreadsheet. However, others prefer to write it down in a notebook. It might seem a bit over the top, but if there is a risk that you might overspend and not be able to repay the card then it is worth doing. If you feel that this is just too much effort, then check your balances frequently instead. Go online a few times a week and look at you bank account and credit card balance to check what is going on with them and whether you will have enough money available to pay the credit card. It might seem like a hassle, but it is worth it and it gets easier the more you do it, especially once it becomes a habit. It is a good idea to make sure that you do this though and then you can be completely confident that you will be able to repay the card in full each month and never have to pay for it and then you will be taking full advantage of it.

Is a Credit Card Better Than an Overdraft?

There are lots of different ways to borrow and some can be quite similar which means that it can tricky choosing between them. An example of this is an overdraft and credit card and it is worth thinking about the similarities and differences so that you can choose the best one for you to use.

Similarities Between Credit Cards and Overdrafts

With both an overdraft and credit card you will need to have them arranged beforehand and then they will be ready to use when you need them. This means that they can be handy to use in emergencies as you will have the money available and ready to use. Neither also have to be repaid within a time limit or at regular intervals although the repayment methods differ greatly. Both have relatively high interest rates although these will differ between providers. Both will need the borrower to have a reasonably good credit score. 

Differences Between Credit Cards and Overdrafts

Credit cards can be used to buy goods and services. They are used instead of cash in shops and also online too. They can also be used to withdraw cash and to buy things abroad, but there are often high charges for this. An overdraft is will enable you to access more money through your current account which means that you can use it by transferring it, drawing out the cash or using your debit card or even writing a cheque.

With an overdraft you will repay the outstanding balance when money goes into your current account. Therefore, when you next get paid something, it will repay it. You will be charged interest for the amount of days that you are overdrawn. With a credit card you will be sent a monthly bill. You will not have to pay interest immediately, but if you do not pay what is owed by a certain date, then you will be charged interest. This means that you get a bit of interest free credit. You also have a choice of repaying everything you have spent on the card and paying no interest, paying a minimum amount which covers the interest and just a little bit more money or repaying an amount in between.

Which is Better?

It will depend on how you want to use the money as to which is better. The fact that you get some interest free credit with a credit card can be really handy, but if you need cash, then you will be charged interest immediately on a credit card, which means that an overdraft might be better if it has a lower interest rate than the credit card that you have. It is worth checking the interest rates too as you may find that the interest charged for cash withdrawals on a credit card might be different to their normal rate or there may be charges as well.

Some people have both and then they will be able to use the one that they feel will work the best for them. However, you will need to be careful of this. If you have access to lots of credit, then it could make it harder for you to be able to keep track of your spending as well as being able to repay it. So you need to be aware of this and think about whether you are likely to be able to cope well with this or whether you will be tempted to spend lots of money because you can and this could mean that you will have to pay out a lot of interest and you may not manage to repay what you owe very quickly.

What are the Differences Between Repayment and Interest Only Mortgages?

There are two different types of mortgages that we might hear about and these are repayment and interest only. We will often find that if we speak to different people then they will be totally convinced that one of these is the best. However, what is best for one person might not be best for another and we may find that our circumstances will change and we will need to have a look at whether we need to change it. However, the first step is to have a good understanding of what they are and then thinking about when they might be useful to use.

What is a Repayment Mortgage?

With a repayment mortgage you will have a monthly payment where you will pay the interest and also repay a bit of the mortgage. This means that during the term of the mortgage you will pay off bits of the mortgage so that by the time the mortgage term ends you will have completely repaid it all.

What is an Interest Only Mortgage?

With an interest only mortgage you will only pay back the interest each month. This means that you will not repay any of the money that you have borrowed. The lender will ask you to make some arrangements though, to make sure that when the mortgage term is up that you will have the funds available to repay the money that you borrowed. This used to be done by investing in an endowment but these days people might choose to use a stocks and shares ISA or a different investment. Investing is not easy and so many people will use a financial advisor who will let them know what they should be doing. They will be able to find them an investment that will calculate will be able to raise the necessary sum of money and they will also keep an eye on this and if they feel that it is not doing as well as planned, they will advise their clients to start investing more or to move their money. This might sound tricky, but they know what they are doing and you could also do some research yourself so that you come up with an investment plan.

When Should I Use Them?

Some people like to know that they are repaying the money that they have borrowed and are whittling down that loan and so find a repayment mortgage is for them. Some people are worried about investing and do not trust it or feel scared that they might lose their money and so also favour a repayment mortgage. However, some people are happy with investments and feel that they will be better because they have a chance of making more money than they need so they could actually repay the mortgage early or have some money left to spend on other things.

Some people do not have such good reason though. Some people like the idea of an interest only mortgage because they plan on only repaying the interest and not worrying about repaying the loan. This is not a good approach because it means that when the mortgage term is up, they will have to sell the house to repay what they owe. Although this might seem okay in theory, there is a risk if the value of the house has not gone up very much. They will also be left with nowhere to live and although they may have some money left over form the sale of the house to put towards another, it may not be enough to buy one outright and they may struggle to get another mortgage if they are close to requirement age.