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
[co-author: PJ Hoffman - Project Manager, Financial Services Practice Group]
The Consumer Financial Protection Bureau (CFPB or Bureau) announced on March 17 that it is seeking public comment, via a Request for Information, ahead of a second study on the credit card market.
With this request, the Bureau is seeking to gather more information about how the credit card market is functioning, as well as the impact on consumers of the 2009 Credit Card Accountability, Responsibility, and Disclosure (CARD) Act. The specific areas that the Bureau is requesting information on include the following:
- the terms of credit card agreements and practices of credit card issuers
- unfair or deceptive acts or practices in the credit card market
- consumer understanding of rewards products
- the effectiveness of disclosure of terms, fees and other expenses of credit card plans
- whether implementation of the CARD Act has affected the cost and availability of credit, particularly with respect to non-prime borrowers; the use of risk-based pricing; and credit card product innovation
- online disclosures
- grace periods
- add-on products
- fee harvester cards
- deferred interest products
- debt collection practices
- ability-to-repay standards, as they relate to credit applicants.
Any public comments may be submitted to the Bureau by May 18, 2015. The CFPB will present a public report to Congress after compiling the feedback received during the comment period, which we expect to be sometime during summer 2015.
We have already seen an advanced notice of proposed rulemaking on debt collection activities in 2014 and expect to see a proposed rule soon. The study will likely provide a roadmap of the issues that will be included in any rule on debt collection activities when it is proposed.
In addition, in 2013, we saw the CFPB amend Regulation Z to make it easier for spouses or partners who do not work outside the home to qualify for credit cards. The request asks about ability-to-repay standards for credit cards and includes questions about how card issuers are determining whether credit card applicants have sufficient income or assets to qualify for new credit or a credit line increase. This could lead to additional rulemaking that would revise Regulation Zs ability-to-repay standards as they relate to credit line increases.
Paying for college
Trina Orr, director of financial aid for Western Carolina University, said the first thing Western tries to do is look for aid possibilities for students that dont have to be paid back.
We try to exhaust all funds that do not have to be repaid initially before we ever even offer a student loan and/or a parent loan, she said.
She said the university tries to educate families and get them to look at what the total expenses are going to be, including residential living expenses.
We certainly do try to get out the word and to spread the message that if you do have to borrow, borrow wisely, Orr said.
Not all loans are created equal.
Need-based subsidized loans are different from unsubsidized loans, Orr said.
The way that the subsidized loan program works is as long as a student is enrolled in school at least half time, which at WCU would be six hours, the federal government will cover the interest for the student so interest does not accrue while they are enrolled in school, she said.
Students have a six-month grace period after they graduate before they must begin repaying the loans.
Unsubsidized loans are not based on need and the interest does accrue while the student is enrolled.
And federal loans are different than private loans, Asher said.
Federal loans come with important repayment options and borrower protections that private education loans do not provide, Asher said.
That includes income-driven repayment plans that cap payments based on a percentage of income and family size.
Federal loans are the safest way to borrow if you need to borrow. And its crucial to know that and to get information about what is and is not a federal loan before you decide how to fund your education, Asher said.
Students also need to do their homework when it comes to finding out their entire costs, looking beyond tuition when deciding on a school, she said.
It puts a lot of burden on the consumer, and theres no easy way to figure it out, she said.
Students applying for federal aid go through entrance counseling before they are allowed to borrow through the federal loan program. They also go through exit counseling as they prepare to leave school and begin paying off those loans.
But UNCA Provost Joe Urgo says more financial literacy education is needed for students.
Just generally speaking, there is a great deal of need for loan education among students so they know how much they are borrowing and whether the loans are accumulating interest while they are in school, Urgo said. Nationwide a lot of students dont understand this any better than some of their parents understand credit card debt.
UNCA has talked about adding more financial education for students.
Urgo said public universities also need to continue to make the case that the state should be funding higher education so that we can keep tuition manageable.
I think this is part of a larger national conversation about whose responsibility is it to fund higher education, he said. Is it strictly a consumer good where the individual is responsible for it or is the greater good for higher education such that it ought to be a high priority for society as whole.