Improve your credit report as a couple

To ensure you’re in a good financial position to borrow money, a lender will take a look at your overall credit history, captured as a credit score. If you’re in a de facto relationship or married and are planning to take out a loan, both your credit scores will be examined - after all, you are a team. So, it’s important both applicants have a strong credit history as a “bad” one could affect your chances of taking out a loan.

But, the question remains, what do you do if you or your partner’s credit report is not in great shape?

Some people may think that if you get married and change your name, your credit history under your old name will disappear – unfortunately, this isn’t true. So, if you want to apply for a loan with your partner and you desperately need to improve your credit score, here’s what you can do.

What is considered a good credit score?

A credit score is a number between zero and 1,000 to 1,200 (depending on the reporting agency) that is used by lenders to determine your ‘creditworthiness’. Typically, a lender will examine your credit score to determine the possible risks they may face in case of any unforeseen events that would render you unable to meet your obligations.

In Australia, there are three main credit reporting bodies: Equifax, Experian, and illion.

What is considered a “good” credit score varies from agency to agency, but a general rule-of-thumb is that a credit score above 600 is ideal. With a good credit score, a lender will likely be more inclined to do business with you.

Here is a breakdown of the credit score tiers from each reporting bureau:

	Equifax	Experian	illion
Weak	0 to 505	0 to 549	0 to 299
Fair	506 to 665	550 to 624	300 to 499
Good	666 to 755	625 to 699	500 to 699
Very good	756 to 840	700 to 799	700 to 799
Excellent	841 to 1,200	800 to 1,000	800 to 1,000

How to improve your credit score as a couple

Does your partner have a low credit score? If so, this could be a red light for lenders and may ultimately hinder your chance of getting approved for a loan.

To receive the green light (approval) from a lender, here’s what you can do to improve your partners credit score:

Check your credit report for errors

The first step to improving your credit score is to check your credit report for errors. You can request a free copy of your credit report from credit reporting agencies such as Equifax, Experian, or Illion. Once you have your report, review it carefully to ensure that all the information is accurate. If you notice any errors, such as incorrect personal information, missed payments that you have actually made, or accounts that you did not open, contact the credit reporting agency to have the error corrected.

You don’t want to be penalised for a mistake you didn’t make.

Be honest about your financial past

If you are planning to apply for a home loan, you need to lay all the cards out on the table. If you think that you can hide your credit history from your lender, you are wrong.

Lenders have access to information, such as your credit report, which will show any defaults or credit enquiries. If your lender uncovers any relevant information that you did not disclose, it could jeopardise your chances of obtaining a home loan. If you do have any defaults, it’s best to tell the lender straight up so they can come up with possible options for you.

Also, if you aren’t approved due to your credit report and your partner was left in the dark, it could create tension between the two of you. By being honest from the start, you can come up with a plan of attack.

Create a budget

Although you can’t fix the past, the faster you change your current financial situation, the better. Lenders can see the past 24 months of your repayment history, so if you know that you have missed or been late on a repayment, chances are your lender will see it too.

By writing down when all of your bills are due, it will help remind you when to pay them and budget effectively to ensure you have enough money. You can set alarms on your phone, set up automatic payments, or write it on the calendar - anything to help you remember.

Remember, it’s a lot easier if there are two people working together rather than one. 

Get joint accounts

Many couples decide to have joint bank accounts as they are convenient and help you to save together. If you or your partner is a person who likes to spend, it can be a good way for both of you to keep an eye on the transactions and then adjust your budget if you need to. It may work well for you to also have a joint savings account so you can both keep track of your savings.

Have a chat with your financial institution and see what options are available for joint banking.

Don't apply for too much credit at once

When you apply for credit, such as a loan or a credit card, the lender will check your credit report. These inquiries can have a negative impact on your credit score, especially if you have made multiple inquiries in a short period. Therefore, it's essential to be selective when applying for credit - only apply for credit that you need.

Don’t throw away a rarely used card 

Even if you or your partner has finished paying off your credit card debts, don’t close the account. Keeping it open, with no negative reports, will impact favourably on your overall score. However, if the account has an annual fee, you may want to consider closing it as the fee can offset the benefit of keeping the account open.

Seek professional help if needed

If you’re struggling to improve your credit score as a couple, it may be helpful to seek professional help. A credit counselor or financial advisor can provide guidance on how to manage your finances together and improve your credit score. They can also help you create a budget and develop a plan to pay off your debts.

In order to create a strong credit report you need to plan ahead. Most credit reports show information from up to five years ago, so if you and your partner are planning to buy a house or car within the next few years, it’s definitely time to start improving your credit history. But remember, improving your credit score takes time, and there are no shortcuts. It's essential to be patient and consistent in your efforts.