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
NEW YORK (CNNMoney) -- Rhea Shannon is the kind of girl who is passionate about telling stories, and is quick with a smile.
Her resilient personality has gotten her through a lot.
But what really grips you is her story. Last month, Shannon shared the story of her father, who died while on active duty in Afghanistan during her senior year of college. The loss of her father broke Shannons heart in more ways than one.
She was left with $54,000 in student loans.
We werent the only ones moved by her tragic story. Barely two hours after the story was published on CNNMoney, Shannon got a phone call from Ashlynne Haycock at Tragedy Assistance Program for Survivors, also known as TAPS.
Haycock called to offer Shannon the impossible: To wipe the entire debt.
I was at my desk on the phone and tears were coming down...I was like, Is this really happening? said Shannon, went to Howard University in Washington, DC and now works as a production assistant at a television channel.
Luckily, when the call came, Shannon picked up the phone, because she had been dodging phone calls from numbers she didnt recognize in a bid to avoid her creditors.
It was an overwhelming moment for Shannon, whose father had co-signed the debt and had been her biggest champion. In fact, Shannons going to college was such a big deal to him that he had re-enlisted in the Army to help pay for it.
TAPS is a nonprofit group that helps people who have lost loved ones in the military. Haycock focuses specifically on education.
Haycock too lost both of her parents, who were in the military. She felt an immediate connection to Shannons story.
Usually, Haycock helps students by working with the Department of Veterans Affairs and private organizations.
But when she heard that Shannons loans were through JPMorgan Chase, a TAPS partner, Haycock reached out to the bank immediately.
We sent them an email with a link to the story and they called us back within less than two hours, Haycock said.
The debt was forgiven through JPMorgan Chases Military Survivor Program, which is always on the lookout for cases like Shannons. Since the program started in 2013, JPMorgan has forgiven $4.3 million in student loans, car loans, mortgages, and credit card debt held by fallen service members.
Shannon can now move forward with her life debt-free. She is thankful that she got the college degree that mattered so much to her father.
He had three kids about to go to college in four years or so, Shannon said. He knew what had to be done to make that happen because college is so expensive.
Through TAPS, Shannon also learned about scholarships that will cover her masters degree if she chooses to go back to school.
Whats next for Shannon? Shes still in shock that the dark cloud of debt is gone, but says shes going to work on fixing her credit and saving for a house like her father taught her.
Shannon says all she can think of now is to say: Thank you God and thank you Dad.
TM copy; 2015 Cable News Network, Inc., a Time Warner Company. All rights reserved.
Dear Mary: What do you think about the idea of refinancing my credit-card debt with a loan from one of the peer-to-peer lenders out there? It seems like a good idea to me, but I dont know that much about it. Id really like to know what you think of this. Thanks. -- Tom
Dear Tom: First, I want to make sure you are talking about P2P (peer-to-peer) loans, NOT payday loans (they have NOTHING in common other than both start with the letter P). I am a huge fan of the idea you mention using a P2P loan (NOT payday), but with a few very strong cautions!
Basically, P2P lending offers a fixed-rate, simple interest, fully amortized unsecured loan with which a person can, as you state, refinance their credit-card debt by taking the proceeds and paying off those accounts.
The interesting thing is that P2P loans offer rates that are much lower than the variable rates on most credit cards, but only to folks with great credit who can qualify. So far, so good!
But it can get tricky. In fact, without knowing what youre doing, it would be like walking though a minefield blindfolded. There are lots of ways you could blow yourself up! For example, lets say you get a P2P loan, but then dont handle those paid-off accounts well. You could end up with double the trouble if you run your credit-card accounts back up -- because you have the P2P loan as well. Thats only one of the things that could go wrong.
I suggest you not even think about tiptoeing into the world of peer-to-peer borrowing until you get some help.
You may want to take a look at a new e-book I have just written and made available at DebtProofLiving.com, The Complete Guide to Refinance Your Credit-Card Debt. It will answer all of your questions, help you figure out which P2P lenders are reputable, where all the land mines are hiding in that minefield and how to avoid them. Once you have the right information, I think you will discover that a P2P loan just might be a great way that you can repay your credit-card debt cheaper, better and faster.
Dear Mary: I recently joined your Debt-Proof Living community, and I am learning a lot from your newsletters and daily emails!
I have a question regarding interest on a student loan vs. a home-equity line of credit. We currently have a $9,500 Parent Plus Loan, which has an interest rate of 7.650 percent. We have a $25,000 HELOC currently with $21,000 in available funds, which has an interest rate of 5.95 percent.
Does it make sense to pay off the Parent PLUS loan with the HELOC since the interest is less on that account? Do you know how that will affect any tax deductions well be able to take? I appreciate any information you can give me about this. Have a great day! -- Carolyn
Dear Carolyn: There are several things you need to consider that have to do with unintended consequences of moving a PLUS loan to your homes equity.
- By moving the debt to your homes equity, you are putting your house at risk. If something happens and you fall behind on your HELOC payments, you will be facing foreclosure, and thats no small matter. If you fall behind on a parent PLUS loan, the consequences are significant, but they cannot take your home.
- If you move the PLUS loan to your HELOC, the entire amount becomes due and payable should you sell the home, at the time of closing. If you have a PLUS loan and sell your home, nothing changes as the PLUS loan would have nothing to do with the sale.
- The interest on your parent PLUS loan is fixed -- it cannot be adjusted, regardless of what happens to the economy. Most HELOCs are subject to variable interest. Should interest rates go up (many experts are predicting this will happen in mid- to late 2015), that triggers an adjustment to all variable rate loans that are tied to an index, like the prime rate. You could start out at one rate and then watch that interest zoom higher and higher, and you would have no recourse but to pay the balance in full.
- PLUS loan interest is tax-deductible up to a certain limit; however, as of 2010, the most you can deduct for student loan interest in a single year is $2,500. The interest on a HELOC is tax deductible just like traditional mortgage debt.
You have a lot to consider. It is important to consult the Internal Revenue Service Publication 970, entitled Tax Benefits for Education. This document will provide insight into which of your expenses are deductible and up to what amount. You should also get some input from your tax advisor before making your decision.
Thank you for your kind words, and welcome to my DPL family!