If I chose my favorite job ever, it would be a tie between working for a mortgage broker and working as a legal assistant for a real estate attorney.
While this confession causes some people’s eyes to glaze over and ask with sincere wonder what could be so interesting about either, the truth is they were the most interesting jobs I’ve ever held. I walked away from both knowing so much more than than I ever did before I started.
While many would never make the association, it was common for clients to come to us when they were ending relationships. (Often, a couple had divorced and the spouse who was awarded the home was refinancing or selling it.) Sometimes, clients had a lot of their net worth tied up in property, and it had to be divided.
Working with these individuals taught me about the best and worst elements of human nature.
Breaking up is always hard to do, but add money and division of property into it and things can quickly go from bad to worse. Indeed, I had one co-worker at the mortgage company who jokingly said that she would never marry again unless a would-be fiancee submitted to a psychiatric exam, a criminal background check and a credit report.
While that still makes me laugh, the sobering truth is she had a point, especially when it comes to the last bit: other than splitting the occasional bill or paying our half of the rent/mortgage or utilities, very few of us ever think to ask about our significant other’s finances, including those things found in their credit report. (Indeed, too few of us even know what’s on our credit report, much less what our scores are. )
Despite the fact that the very idea of bringing up money seems like a huge romance killer, the truth is what we don’t know about our partner’s credit and financial history can hurt us. As I personally observed more times than I can remember, this is one area where ignorance is not bliss.
Therefore, before we take the plunge and get married (or in some cases even decide to live with together), it is important to keep the following tips in mind:
1. Know your credit score (FICO) and make sure you and your partner get your respective credit reports with credit scores at least once a year.
In a nutshell, a credit report is individual’s credit history. It usually has a a FICO score that ranges between 300 to 850. The higher the score, the more likely one is seen as trustworthy and likely to pay off their debts. By contrary, the opposite is true; a low score means that they are seen as less trustworthy and more likely to default on their debts.
While many people mistakenly think that credit reports and FICO scores only matter if one is apply for a mortgage, the truth is these things determine everything from the interest rates on bank and credit cards, to the interest rates on car loans, and even whether or not in some cases your application for an apartment lease is approved or not. (It makes sense; the landlord wants to make sure their tenants can pay the rent.)
When you get the credit report, pay special attention to all that is listed. Credit reports aren’t perfect and mistakes can and do happen. If that happens, you have the right to dispute such errors under the The federal Fair Credit Reporting Act (FCRA). (To find out exactly how to do this and how to get a free credit report in the first place, visit the Federal Trade Commission’s website. )
2. Pay special attention to any liens, judgments or bankruptcies on said credit report.
Legally, if someone has a lien or judgement against them, then they must pay off the creditor. In some cases, their wages may be garnished. If the lien is on piece of property like a house, then it must be paid or settled before they can sell or refinance.
Liens and judgments can be serious because they not only can negatively affect credit scores but can also affect the amount of money you or your partner take home each pay period.
For example, say your partner or spouse makes $3,000 a month but $1,000 per month is going to a judgement like a judgement for child support. That means the amount s/he is taking home is a lot less than what they are earning.
While liens and judgments usually show up on credit reports, some times they do not. In some cases, it may be necessary to do a search at a county or city clerk’s office. (Many of now have searchable records online.)
3. If you are getting married, learn what community property means and if the state you live in is a community property state.
Many people mistakenly think that if they marry someone who already owns a home, the house becomes theirs as well once they marry. This is not true. In fact, the home only legally becomes the other person’s if it is gifted to them via a deed of gift. (Also, as the majority of states do not recognize common-law marriages, it usually makes no difference if you’ve lived there for an hour or 50 years. If your name isn’t on the deed, then it’s not yours.)
Community property refers to property obtained during a marriage—not before—and it even excludes some things that one obtains during a marriage like an inheritance. (For example, if your rich uncles dies and leaves you $1 million, that is your money and not your spouse’s.)
Likewise, if two people buy a home together before they marry, it does not automatically mean that the house is owned equally 50/50, even if both people’s names are on the title and mortgage. In some cases, they may not even know this until they part ways.
In any case, any specific questions about property are best handled by a real estate attorney. While many may balk at a the expense—good ones don’t come cheap—it may be very well worth it to spend $500 to $2,000 in the long run.
4. Be careful when co-signing for any sort of financial agreement like a car loan, cell phone account, credit card, etc.
Once we co-sign, we are legally and financially responsible for that debt. The wise-cracking former worker mentioned above told me several horror stories about her experience as a loan officer at a local bank. Per her, she had at least three or four phone calls or walk-ins from people (usually women) who co-signed for car loans and loans and then the other person disappeared and/or stopped paying. As sad as these stories were, there was nothing she or anyone else could do. Legally, they had to pay them. It didn’t matter if they had access to said property.
While it’s easy to lose our hearts when it comes to love and believe that our lover would never hurt or deceive us, it’s important not to lose our heads no matter how in love we are or think we are.
Things happen. People do lie and deceive, and sometimes it can be the very ones that we never suspected.
Therefore, think very, very carefully before agreeing to take on someone else’s debt. If not, the debt could last far longer than the actual relationship.
Just because we should marry or partner with someone out of love does not mean that money is not important. Whether we admit to it it or not, finances do matter and can seriously impact a relationship.
Taking a few steps like those listed above and clearing up any sort of legal questions can ultimately save everyone involved a lot of time, money and heartache. Therefore, don’t be afraid.
Remember that true intimacy sometimes involves going to those uncomfortable places we would rather not visit but being all the better for it once we go there. This applies to financial intimacy as well.
Love elephant and want to go steady?
Editor: Catherine Monkman
Photo: Michael Swan/Flickr