You can share many things as a married couple, but one thing you wont share is your credit profile. This doesn't mean you should disregard your partner's credit, though. While your credit reports and scores aren't merged in marriage, when the two of you apply for a joint credit card or loan, both of your credit profiles are taken into consideration. To score the best interest rates, it's beneficial to know where you each stand and what you can do to aim for or sustain a great credit profile.
If your spouse is just beginning to build credit history, here are three tips to help him or her reach that goal.
1.Help your spouse understand the fundamentals of credit.
Credit can be puzzling. One of the best things you can do is help your spouse understand key credit concepts, including...
- What goes into a credit score. By understanding what factors credit scoring models care about, your spouse can know what to work on. For example, your credit card utilization rate and on-time payment percentage are two of the most important aspects of credit management. Knowing this, your spouse might make a greater effort to pay bills by the due date and avoid using a high percentage of available credit.
- Major mistakes to avoid. It's a lot easier to damage your credit health than it is to improve it. Encourage your spouse to avoid applying for several credit accounts at the same time, maxing out credit cards and engaging in other habits that could impact his or her score negatively.
- Habits that can build a healthy credit history. Along with warning your spouse about mistakes that could damage credit, stress important good habits such as monitoring accounts and credit regularly, actually using the credit granted and paying bills on time and in full.
By sharing these credit basics with your spouse, you can empower him or her to start a credit journey off right and make smart credit-related decisions in the future.
2.Consider financial actions that could help your spouse build credit.
Making your spouse an authorized user or joint account holder.
Do you have good credit? Your positive history could help build up your partner's credit. For example, by adding your husband as an authorized user on your account, you'll allow him to use your account and "piggyback" on the account's credit history. Since the account information will usually show up on both your credit report and the authorized user's report, this account could help build his credit as long as the payments are made on time and the balances are kept low. However, keep in mind that some scoring models weigh this factor differently than others.
Adding your spouse as a joint account holder is a similar but much more committed strategy. Unlike authorized users, joint account holders are held responsible for the debt associated with the account, and the joint nature of the account can be harder to terminate.
Seeking new credit that is the best fit for your spouse.
While the authorized user or joint account holder strategy can be useful, your spouse may eventually want to get credit on his own. If he's still new to credit, he may not be approved for a conventional credit card or may be subject to higher interest rates, so it's important to pick a card that's more suitable for those just starting to build credit. For example, a secured card could be a workable alternative. These cards typically have higher approval rates, as they usually require a deposit that is then used as the credit limit for that account. Alternatively, if your spouse is a frequent shopper at a particular store, a retail card may make the most sense, as those can be easier to qualify for. Just be sure to stress the importance of paying the balance off each month, as these cards tend to have higher interest rates.
3.Review your spouse's credit report and scores together.
Does your wife have an established credit report? Go over the details with her and encourage her to pull reports regularly. Credit reports can be intimidating, so if it's her first time seeing one, explain each section, show herhow to spot red flags and stress the importance of disputing errors and keeping that report as accurate as possible.
After your wife has a long credit history, there should be enough information on the report for her to receive a credit score. She should then keep an eye on this score, as doing so is a great way to learn firsthand what actions affect her credit. In short, she can use these observations to guide future decisions and keep working toward better credit.
The bottom line: Credit
doesn't need to be scary or confusing for your spouse. Use these tips to help
empower each other to build credit. Whether you're dreaming of buying a home,
starting a business, getting a rewards credit card or even getting a new cellphone
plan, a good credit score could provide the two of you with better options.
Financial Wellness Series
Presented in partnership with the National Affordable Housing Corporation, Read Saskatoon and Affinity Credit Union.
Winter 2015 Schedule
Budget Boot Camp
Meeting Room, Cliff Wright Branch
Jan. 14 6:30 pm to 8:30 pm
Get your finances back on track this year. Learn tips and strategies to move toward your financial goals.
Presented in partnership with READ Saskatoon.
Credit Building Program Workshop
Auditorium, Cliff Wright Branch
Feb. 2, 17 and 23, 6:30 pm to 8:30 pm
The Credit Building Program consists of three separate workshops. Although you are welcome to attend any one individually, you will receive a certificate of completion for attending all three. Presented in partnership with NAHC. To register for one or all of these workshops, go to nahcorp.ca
Workshops currently offered include: Credit Basics (Feb. 2), Money Management Budgeting (Feb. 17), and Becoming a Homeowner (Feb. 23)
Home Owner Preparation Education (HOPE) Course
Auditorium, Cliff Wright Branch
Feb. 26, 6:30 pm to 8:30 pm
The HOPE Course ensures the success of each new homeowner receiving financial assistance from the information to first-time homebuyers on maintenance, budgeting and condo living, among other topics. The course is completed during one four-hour session. Presented in partnership with NAHC. To register for this workshop, go to nahcorp.ca
While one US state in particular (No. 1 on this list) continues to have a bad track record when it comes to excessive credit card debt, American consumers in general are known for getting carried away when paying with plastic. Among American households with at least some amount of credit card debt, the balance is an average of more than $15,000.
Its not a subject most Americans are comfortable discussing, either. In a March 2013 poll for CreditCards.com, 85% of respondents said they were unlikely or somewhat unlikely to talk with a stranger about credit card debt, making it the most taboo subject surveyed, even more off-limits than religion, politics, salary, or love life. In certain states, its likely an even touchier subject.
Credit.com recently reported on the states with the highest average credit card debt, based on data gathered by Experian-Oliver Wyman Market Intelligence Reports. The 10 states are ranked based on the highest average credit card debt per cardholder. Experians data, which covers Q3 of 2014, measures the change from the previous quarter as well the change from the same quarter of the previous year.
According to Experians research, the average credit card balance among individual US cardholders was $3,769 in Q3 of 2014, increasing slightly from $3,734 in Q3 of 2013. Every state in the top 10, however, shows an average of more than $4,000 per cardholder.
To be clear, the following figures represent the average outstanding balances for the quarter. These credit card balances arent necessarily late or incurring interest. All cardholders that actively use their cards incur a balance every month during the billing cycle, even if they pay it off on time. Here are the states with the most credit card debt, based on data provided by Credit.com.