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Your spouse's bad credit can lead to troubles

  Sat, Mar 25, 2017     written by : CSF-Team
Spouses Bad Credit

When in college, Anurag and Trupti were like any two people in love. They wanted to get married, but not before they were settled in their respective careers. Anurag aspired to be a filmmaker and Trupti wanted to make it big as a corporate lawyer. Much to the chagrin of their parents' they courted for nearly a decade before they finally got hitched in November 2016.

They thought they pretty much had it all. Anurag was successful as a filmmaker and was basking in the glory of two consecutive hits. He had also received critical acclaim in foreign film festivals and was much in demand in the regional film industry. Trupti too, was steadily rising the corporate ladder and after seven years, had become an asset to the IT firm that she was employed in. After their marriage they thought they were ready to move out Anurag's parents' home in Thane and invest in their own home.

Stepping into troubled waters

Trupti who had a good head for numbers thought she had it all worked out. She had been saving up in equity mutual funds for the past five years. Anurag too had received a lumpsum payment from his producer after the recent success of his film. The down-payment for their dream home would thus be a breeze, or so they thought! While the private bank they had chosen accepted their application they promptly got a call saying that their application had been rejected.

On hearing the same the couple rushed to the branch to learn that their application had been rejected because a poor credit score. On vehemently opposing the same, as Trupti knew she had a good CIBIL score of 800, she was shocked to know that Anurag's score was poor at 535. As a result their average score was below 750 that was not satisfactory.

A poor credit score is an impediment

While Trupti was meticulous about her financial health and ensured that she never had to bother about bad credit fix, Anurag was careless about his finances. Before his films became a success, he had piled up a sizeable amount of debt on his two credit cards. Besides he had a history of late payments on a personal loan he had taken to buy camera equipment about four to five years back. Trupti, was understandably upset with this carelessness and was miffed about the fact that Anurag had kept her in the dark about his credit score and imagined Anurag would end up on the loan defaulter list.

After a long-drawn argument that followed, Trupti decided that this was no time to fight and took up the matter in her own hands. She explained to Anurag that even though her individual credit score was not hampered because of his financial reputation, together they could not apply for any further credit till Anurag actively sought a bad credit fix.

A plan to rectify bad credit history

Although they had an option of looking for loans with bad CIBIL score from non-traditional lenders, Trupti decided that loan for low CIBIL score was not the best option in the long run. Therefore, they put their dreams of home purchase on hold for the time being and decided to stay on rent till Anurag had fixed his CIBIL score. Anurag also suggested that staying in the same locality would give them a fair idea of what the amenities were like in the area before they finally zeroed in on the purchase.

Trupti and Anurag decided to draw up a plan to tackle their debt. Anurag would use nearly half of his earnings to repay the entire debt on his credit cards. This would put them on a back footing as far as their finances were concerned, but it would help him bring up his CIBIL score at a single shot. The remaining amount Trupti decided would go into a liquid fund to keep it away till such time they were ready for their purchase. In the meantime, Trupti amped up her SIP amount in the equity mutual funds to continue saving a higher amount for their down payment.

Anurag and Trupti have actioned their plans and are now living on rent. Meanwhile here are the things Trupti has inculcated in Anurag to ensure that he does not falter on the credit score front going ahead:

  • Making timely repayments - Anurag still uses his credit cards but does so judiciously. Instead of tossing his card statements into the garbage, he scrutinises them and makes full repayments in each billing cycle.
  • Keeping credit utilisation low-Anurag had a habit of splurging on shoots and was generous with the parties after wrap ups. This meant that his credit utilisation ratio (the amount of credit one uses as against the total credit made available to him) remained well over 50%. Trupti explained to him that this was a cardinal mistake and insisted that he keep credit utilisation at no more than 30%
  • Not applying for too much credit - Finally, Anurag was always the first one to apply for a personal loan on his own accord if something went amiss on his set. Many a times he had made applications for personal loans, but did not finally did not have to take the loan because some other source of finance came his producer's way. However, making an application one too many had dented his CIBIL score. Trupti explained that each time a person made an application for a fresh line of credit, the concerned lender made request for his CIBIL score, which was listed as a "hard inquiry" by CIBIL. Each time there is a hard inquiry your score takes a hit.

Anurag is wiser about his credit behaviour and is making a visible effort to improve his CIBIL score. He agrees that loan for bad CIBIL score is avoidable. Trupti on her part ensures that she too maintains good credit behaviour and together they are confident that their average score will improve by the end of 2017. They are hoping they can make the booking of their first flat by their first anniversary!