The newest pick-up line: What’s your credit score?

Research has been found that examines the linkage between relationship status and personal credit scores. Article includes tips to increase your personal credit score.

For years, experts have educated consumers on the importance of credit scores. Financially speaking, credit scores are a key component that creditors use when evaluating a person’s credit worthiness. In fact, it seems lately that every financial decision you make can positively or negatively affect your credit score and, in turn, affect you financially.

However, new research included in a working paper from the Federal Reserve Board, and made public by the Washington Post, found a strong connection between your personal credit score and the likelihood that a romantic relationship will begin, be maintained, and be successful over the long run.

According to Dokko, Li, and Hayes (2015), if both partners in a relationship have a high credit score (meaning a score of 720 or higher) when they enter the relationship, they are more likely to stay together. Conversely, for those partners that have large gaps in their score (meaning one partner has a low score and another partner has a high score) the researchers found that partners were less likely to be able to maintain a relationship and were more likely to see their relationships dissolve.

So, if this important number is now influencing your personal relationships, what can you do to increase your score?

  • Pay your bills on time: The biggest component to your credit score is your payment history. Late payments and nonpayment to any creditor will be recorded on your credit report, which could lower your score. A low score can affect your ability to access new credit and could influence the interest rate you receive for new credit. Also, it could affect your ability to get a job and influence the amount you may pay for insurances.
  • Limit all outstanding debt to less than 30 percent of your maximum allowable credit: Understanding how much of your available credit you are using and how much total debt you have will influence your overall score. Try limiting the amount that you keep on unpaid balances to less than 30 percent of your maximum allowable debt to keep your utilization ratio as low as possible.
  • Length of credit History matters:  Did you know that the longer that you have an established relationship with a creditor, the better the benefit to your score? This is because the length of time you have a relationship with a lender matters. Showing that you have a proven history of paying your bills and have good standing with debtors can positively influence your score. 
  • Limit opening new lines of credit unnecessarily:  Have you opened new credit recently? If so, you may have taken a hit on your credit score and didn’t even realize it.  As a result, make sure that you are strategic when opening new lines of credit. Every time you open credit, you are forming a financial relationship with that lender. As a result, it is important that you do your research and make informed decisions. 
  • Be aware of the effects of co-signing: When you co-sign on a line of credit for another individual (like a spouse or partner), you are assuming the responsibility of paying the debt. As a result, if a debt that you co-signed for is unpaid, this can negatively influence your credit history. 
  • Check your credit report often:  Want to make sure your credit report (and credit score) are as attractive as you are? Review your personal credit report!  You are eligible to receive one free report from each of the three credit bureaus per year by visiting this website.

Need more information about the ins and outs of credit? Michigan State University Extension has released a new toolkit for homeowners who are experiencing or have previously experienced foreclosure. Enclosed in this toolkit is a section on Rebuilding Your Financial Situation and Credit History.  The toolkit is available to download free at MI Money Health website. 

Michigan State University Extension offers financial literacy and homeownership workshops throughout the year to help you become financially healthy. For more information of classes in your area, please visit either the MSU Extension events page or MI Money Health website. Additionally, you can take the Financial Health Survey at MI Money Health to access if you’re financially healthy and discover more ways you can improve your financial health. 

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