Staying together for richer, for poorer? Don't take a 'leap' of faith with your financial future
Couples who are celebrating the Leap Year by getting engaged are being urged to spend time planning for their 'financial futures' - after new research from credit report specialists Callcredit Information Group revealed that significant numbers of people are in the dark about their partner's finances.
With the prospect of a wedding, honeymoon, new home and perhaps even starting a family to pay for, building a new life together can be an expensive business, so it is vital that couples know where they stand financially.
But the research, carried out by YouGov on behalf of Callcredit, suggests that more than a third (34%) of UK adults who are in a relationship have no idea about their partner's financial history - and could be putting their future financial stability at risk as a result.
The online survey of 2057 UK adults found that:
- 17% of people believe that their partner's credit report is none of their business;
- One in ten (10%) do not know how much their partner earns;
- Nearly a fifth (18%) do not know how much debt, if any, their partner has.
Couples in Wales were most open about money, with 74% of people having some knowledge of their partner's financial history, while those in London were the least likely to share, with 40% admitting they did not know what their partner's financial history was like, followed by the West Midlands and the East Midlands, both at 38%.
The research also found that although more than half (53%) of couples have some form of joint finance, such as a shared bank account or mortgage, many UK adults (43%) did not know that joining finances in this way would automatically create a 'financial association' on their credit report. Once a financial association is established, lenders may take both partners' financial histories into account when assessing future requests for credit, even if later applications are made in only one name. As a result, if one person has a poor credit history, they could damage their partner's chances of getting finance.
Owen Roberts from Callcredit said: "With the extra Leap Year day on 29 February - traditionally the day when women can pop the question - many couples will be celebrating the start of their lives together, from planning weddings and honeymoons, to looking at getting on the property ladder or starting a family.
"While this is undoubtedly an exciting time, it is also potentially an expensive one, so it is important that couples understand their financial strengths and weaknesses - especially if they're planning to take on any joint borrowing, such as a loan for the wedding or a mortgage on a house. Pooling your resources with your partner can make sense in many cases, but for some, it may be more sensible to keep your finances separate, particularly if one partner has a poor credit history.
"Although it is encouraging that the vast majority (66%) of couples have some knowledge of their partner's financial history, only one in five (20%) of these have seen what is on their partner's credit report, which is the most reliable way of assessing credit-worthiness. We'd urge all couples to check their reports before deciding whether to apply for a joint loan, mortgage or bank account together. You can see your report online with our free for life service, Noddle."
To make sure that 'something borrowed' doesn't leave you feeling blue, Callcredit has put together its tips on planning your financial future.
The Big Day
"The average wedding costs around £20,000 - a significant sum for any couple to find - so shop around for the best deals on everything from savings accounts to credit cards," says Owen. "If you need to borrow money and have a good credit history, look for low-interest and cashback credit card deals. Noddle can suggest suitable cards and loans based on your credit rating, but beware of applying for too many and only borrow what you can comfortably afford to repay.
"It is also worth exploring ways to reduce the cost of the wedding, such as by asking friends and family to help out with catering, haggling with suppliers over prices, or asking guests to contribute towards a honeymoon instead of asking for traditional gifts."
Setting Up Home
"Whether you're renting or buying together, it is likely that you will be credit checked by your lender or landlord, so it is vital that you check your own credit reports before you apply," says Owen. "With a mortgage, if one partner has a poor credit history, you may have to apply under the other partner's name only, but this may reduce the amount you can borrow, as only one salary will be taken into account, and you may need to save for a bigger deposit to make up the shortfall.
"You can improve your credit score by making sure your names are on the electoral roll, ensuring you meet at least the minimum repayments on any debts, closing any inactive accounts and correcting any errors on your report."
"Sit down with your partner and work out a budget for your joint expenses, such as groceries and household bills," says Owen. "If you've checked your credit reports and you're comfortable taking out a joint bank account, set it up so all your regular bills come out of it. It may also be worth you both paying regularly into a joint savings account to cover unexpected bills, such as a boiler breakdown or a car problem."
Starting a Family
It is estimated that first-time parents spend nearly £1,800 on baby-related products before their child is born - and the cost of bringing up a child is around £200,000. "Save money by shopping online for baby clothes and goods - auction sites like eBay are good for second-hand products," says Owen. "But remember to always check that the site you're buying from is genuine and secure, to protect against credit and debit card fraud, and if an offer looks too good to be true, then it probably is.
"If you can afford it, it is also worth looking into child-friendly savings accounts so you can build up a nest egg for their future."
Growing Old Together
The Government plans to bring in automatic enrolment into workplace pension schemes, but this shouldn't stop you making plans now. "It is never too early to plan for retirement," says Owen. "If you don't already have a pension, speak to a financial advisor to find out the best options for you. It is also worth checking whether your company already has a pension scheme you can join, especially as some companies will match the contributions you make."