Money and love are a strange mix.
For example, a good credit score makes you a hotter romantic prospect. The Federal Reserve itself pronounced it true. Last fall, researchers there looked at anonymized data from millions of consumers over 15 years, tracking their scores and their addresses. They found:
- People with higher credit scores are more likely to find stable, committed relationships.
- People with higher credit scores gravitate toward others with higher credit scores.
- Mismatches in credit scores are highly predictive of separations.
If good credit is an aphrodisiac, debt is a romance-killer. In a new Nerdwallet survey, 49% of the men and women who responded said that, given a choice, they would be less interested in a date who shoulders a credit-card balance.
Yet the things you do for love — whether for a romantic partner or family member — can damage your highly attractive balance sheet.
Psychologist Gary Buffone, the author of “Choking on the Silver Spoon: Keeping Your Kids Healthy, Wealthy and Wise in a Land of Plenty,” has seen it before. “People can get themselves in all sorts of trouble in the name of love,” he says. “One of the most common examples are parents and grandparents who fall prey to the notion that giving ‘things’ conveys love, when in fact it just ends up conveying things.”
Here are some times a generous impulse could end up hurting your credit score — and what you might want to consider doing instead.
You overspend to impress
Trying to impress somebody, or feeling an obligation, can lead to putting more on a credit card than you can pay back when the bill arrives.
And particularly when you’re talking romance, it’s easy to justify spending. No one wants to look cheap or thoughtless or uncommitted, at least while love is new. It’s Valentine’s Day, it’s his birthday, it’s your three-month anniversary.
What you can do instead: Consider the would-be recipient. If it’s a child, you can model the behavior you hope he or she will eventually adopt. Buffone says kids are often quicker than adults to understand that love is shown by involvement rather than spending.
If the person you want to impress is an adult, be sure you can truly afford what you’re thinking of spending. Candlelight dinners come in a variety of price ranges — and not every date has to be a dinner, either (DivineCaroline offers these 50 first-date ideas).
You take the financial reins
We know you mean well. Maybe you’re good with money and your partner never has been. It can seem logical to do the jobs you’re good at; say one person is a great cook and the other is comfortable fixing plumbing leaks. But money and credit are different.
Money can represent control, and in a romantic relationship it’s unhealthy for one person to be in charge. And if the person you love is your adult child, taking care of money for them instead of with them indicates you don’t think they are capable.
What you can do instead: Financial therapist Amanda Clayman suggests examining your motivation. “Nurturing is good up until a point; then it becomes enabling,” she says. She suggests thinking through the possible consequences (such as someone remaining financially dependent) before you decide how to “help.”
And if you and your beloved plan to combine households, clearly you need to have “the talk” about money. Credit bureau TransUnion says its recent survey of 1,003 adults revealed that 26% have never known their significant other’s credit score — and 11% of those who did know said their partner’s score was lower than they had expected.
You co-sign
Maybe it’s your kid or your significant other, but somebody can’t get a loan, credit card or apartment without your signature. You trust that they’re good for it.
It may be that they simply haven’t built a credit score yet, and you want to give them a boost. It may be that they have made mistakes in the past, but you feel relatively confident those won’t be repeated.
Or maybe you didn’t understand that co-signing wasn’t simply attesting to their good character, but rather agreeing to pay back every dime owed if they don’t. And it gets worse: You might not even know if they fall behind on paying. (See “What You Need to Know About Co-Signing.”)
Even if they pay as agreed, it could limit your access to credit. Harsh as it may sound, if you wouldn’t feel comfortable taking out a loan of this size for yourself, you shouldn’t co-sign, because you are putting yourself on the hook for the full amount.
If you’re going to do it anyway, be sure that you have some way of knowing payments are being made on time, and find out if you can be released as a co-signer after a certain period.
What you can do instead: If you are considering co-signing strictly to help someone build credit, you could instead give the loved one the money to deposit for a secured credit card or a credit-builder loan, or co-sign the smallest personal loan you can get.
You make your loved one an authorized user
You love and trust them, they love you … what could go wrong?
- First, as an authorized user on your credit card, they have access to your entire credit line but no legal responsibility to repay it.
- Second, it might not help them unless they are starting from scratch.
- Third, bear in mind that while you can remove an authorized user from your card at any time, you are still responsible for the debt already incurred.
If you want to go this route, have a clear understanding of how the card is to be used, and how much is to be charged. Check credit card usage online or set up alerts to let you know when the card is used.
What you can do instead: If your goal is strictly to help your partner build credit, a secured card could be a better way to go, and it will not grant access to your entire credit line.
You try to mend a broken heart
Sometimes, the person you want to pamper is you.
We’re all for being good to yourself. But failure to differentiate between a spirit-boosting treat and a budget-busting splurge can cost you thousands of dollars and hurt your credit.
If spending “is the only way a person knows how to pamper themselves, trouble can’t be far behind,” Buffone says. “If a little love is good (spending) then a lot is better, and there goes the budget or credit scores.”
When you mask breakup spending as “self-care,” it can seem practically virtuous to book a cruise you can’t afford.
What you can do instead: “It’s all about balance,” says NerdWallet columnist Liz Weston. “There are plenty of ways to treat yourself that don’t cost a fortune and that will still allow you to put aside money so that your future can be a treat as well.”
Show future you — the eventually retired you — a little love, too. It wouldn’t be such a terrible thing to leave the workforce with money in the bank.
Bev O’Shea is a staff writer at NerdWallet, a personal finance website. Email: boshea@nerdwallet.com. Twitter: @BeverlyOShea.
Image via iStock.
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