Your wedding will be one of the most important days of your life… and the most expensive. Many times, the cost of an extravagant engagement ring, followed by a blow-out wedding and a five star honeymoon can cost more than just money.
Couples who choose to spend more on these items are also often opting to charge their expenses on credit cards. Unfortunately, if you’re not able to pay the resulting bills on time, your credit score will suffer. With a lower credit score, you can count on higher mortgage rates, interest rates and other long term financial effects. So, is it worth it?
A recent survey conducted by myFICO examined couples’ views on financial management issues. The results reveal that while most know that credit is important, many are still charging exorbitant amounts when it comes to their weddings.
“The talk”: Although more than 75% of respondents feel that finances should be discussed with their partner as soon as they become serious, shockingly, 15% do not believe the right time for this discussion is until after they’re engaged.
Walk the walk: 92% of respondents said they believe it is important to share their credit score with their fiancé; however, more than 30% of these respondents are unaware of their own partner’s score.
Only 13% of respondents feel they see entirely eye-to-eye on fiscal lifestyles with their partners; 16% said they’re on the complete opposite on the spending spectrum than their partner.
Charge it: Nearly 25% of respondents said that they used credit cards and/or loans to pay for their wedding.
Can you afford your dream wedding?: When told to envision no financial restrictions throughout the wedding planning process, more than 60% of respondents still said that they would only be willing to spend up to $25,000; conversely 8% said that if money were no object, they would spend more than $100,000.
Credit catch-up: Nearly 30% said that it will take them up to three years to pay off the charges incurred from the engagement ring, wedding and honeymoon. Moreover, 7% said that it will take longer than three years.
Nearly 40% of respondents admitted that they do not know how joint credit works.
To combine or not to combine? 74% of respondents feel that after marriage you should hold a combination of joint and individual lines of credit.
Not so happily ever after: 17% said should they separate from their partner, they believed it would take more than five years for them to disassociate from their partner’s credit. In reality, in many situations of divorce or separation, it can take up to 10 years.
Given these results, myFICO has put together these helpful tips:
Major bling, or major ding…on your credit score: 85% of survey respondents think it’s a good idea to spend up to $5,000 on an engagement ring, but if you’re charging this to a credit card, you and your partner could spend years paying it off. With this debt on hand, buying a house or a car, will leave little breathing room for your wallet. Take a look at your FICO score first and make a better informed decision once you know exactly where your credit stands.
Budgeting for the Big Day: Expensive taste can cost you and your partner a good rate on a mortgage. Nearly 25% of consumers said they charged a quarter of all wedding expenses. Talk to your partner-to-be and discuss your five “must-haves” and put your credit card toward those priorities. Take a look at our myFICO.com calculators to see how long it will take to pay off those must have items.
D is for – DIVORCE?: So it didn’t work out, but hey, don’t make your credit suffer. Most consumers said married couples should have some or all accounts with their partner. If you’re getting separated from your spouse, close all joint accounts immediately. Your partner’s credit can affect yours, so keep good records of what policies, loans and credit cards have your name on them. See how others have dealt with this difficult transition at the FICO Forums.
Remember, knowledge is power! Learning how to use credit so that it works for you and your partner will be a major step toward a successful future. Now get started!
Author: Julie Degnan, Product Management Director for FICO, leads FICO’s consumer acquisition and online marketing initiatives.
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myFICO is the consumer division of FICO. Since its introduction 20 years ago, the FICO® Score has become a global standard for measuring credit risk in the banking, mortgage, credit card, auto and retail industries. 90 of the top 100 largest U.S. financial institutions use the FICO Score to make consumer credit decisions.