Can a Prenup Protect Your Credit Score?

You may think a prenup agreement is something only celebrities and those with lots of or assets should consider. If so, think again.

“Just the act of creating a prenup, requiring you to discuss each other’s assets and liabilities can help,” says Terry Savage, financial expert and co-author of The New Love Deal: Everything You Must Know Before Marrying, Moving In or Moving On!. “Otherwise how do you know what you’re getting into?”

In The New Love Deal, the authors — a financial expert, judge, and divorce attorney — share some of the “creative” prenup clauses they’ve seen:

Mothers-in-law were barred from sleepover visits.
Wife paid fine of $500 for every pound gained.
Husband’s maximum weight restricted to 180 pounds.
One declared all frequent flier miles would go the spouse who remained faithful.

My Credit, Your Credit, Our Credit?

They also recount the story of one woman who thought her husband’s generous spending habits were “romantic while they were dating, troublesome after they were married, and tragic while they were divorcing.” His extravagant purchases went on joint credit cards that also became her responsibility when they split up.

“The goal would be to keep your credit separate,” says Gemma Allen, a co-author who is also a Chicago divorce attorney. “Pragmatically that gets tangled as the relationship goes on.”

Credit topics you may want to discuss when writing a prenup:

Credit reports and scores. Allen says there’s no reason why you couldn’t put in a clause that would require both of you to review your credit reports and credit scores together each year. This would alert you to any potential issues or potential problems such as late payments, new accounts your spouse hasn’t told you about, or excessive debt. Here’s how to monitor your credit score for free through Credit.com and here’s how to get your free annual credit reports.

Credit and Debt. Will you obtain joint credit card(s)? If so, do you want to place limits around what they can be used for (such as household expenses or family vacations)? And who will pay those bills if you split up? If you keep your credit cards entirely separate, then how will those joint expenses be handled?

“What’s really tricky is (figuring out) how life is going to go on day to day,” says Allen. “It’s hard to micromanage (though) some do. Some (prenups) will stay things like X will support the family and whatever Y earns can be banked. Or each will contribute to household expenses.”

In the book, the authors recommend disclosing existing liabilities (debts) but also thinking about future liabilities. For example, will one of you have to pay for college for a child from a previous marriage? What if that means taking out parent student loans for that child — will both of you be liable for those loans? What about business assets and debt?

Remember, of course, that state law may trump a provision in the agreement. For example, in a community property state all debt incurred after the marriage is likely to be community property. So it’s wise to work with an attorney to make sure the agreement is fully vetted and legal, and if you move to another state, to update it to reflect changes in state law. “Bottom line is that you must ask an attorney registered in your state, because laws are different in each state,” says Savage.