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
It's easy to let your credit card debt slip out of control. Despite your good intentions, one or two purchases over your budget can snowball from a small balance to a heap of debt. In fact, the average US household carries more than $15,000 in credit card debt, according to NerdWallet's July analysis.
No matter how much credit card debt you have, it's important to face the problem and make a plan to pay it off for good. Here are five signs your credit card debt is out of control and tips for regaining mastery of your finances.
1. Youre in denial.
Neglecting your bills, dodging calls from unknown numbers and refraining from discussing finances with your significant other are clues you may be in denial about your debt.
But ignoring debt will only make it grow: Your accounts will continue to accrue interest and late payment penalties.
How to regain control: Look at your balance statements. List each of your debts, along with their due dates, minimum payments and interest rates. Pay the minimums on all of them.
Prioritize your debts, starting with the one with the highest interest rate, and use any additional funds you have to pay down the first debt on the list. Then, move onto the next one, and so on, until all of the balances drop to $0.
2. Your repayment deadline is vague.
If the date you'll be debt-free is "someday," that lack of clarity may be preventing you from getting your credit card debt under control.
A specific payoff date is important for several reasons: It forces you to devote your time and resources to meet a deadline. It also gives you a sense of when the stress of paying off debt will end. Knowing that your situation won't last forever could motivate you to resist the urge to spend.
How to regain control: Write down your take-home income and subtract necessary expenses, including your minimum debt payments. If you already have a small emergency fund, your leftover income can supplement debt payments. Use a debt payoff calculator to find out how long it will take you to get rid of your debt if you apply that extra payment to your balance. The result is your debt-free date.
If the date seems too far away, re-evaluate your income and expenses. By increasing your income or lowering your expenses, you can free up more cash and pay down your debt faster. Consider asking for a raise, freelancing on the side or selling unused belongings to bring in more money. Trim costs by canceling old subscriptions, finding cheaper entertainment or eating out less.
3. You jump from balance transfer to balance transfer.
Credit card balance transfer offers with 0 percent introductory APRs are a great way to alleviate your interest burden and help you pay off debt faster.
However, if you find yourself shifting your debt from one card to another without making any progress on reducing it, you may be stuck on the balance transfer hamster wheel: You make minimum payments - which are largely negated by balance transfer fees - and then transfer the remaining balance to a new card each time the introductory APR expires.
How to regain control: Moving a balance isn't the same as paying it off. If you have a balance transfer card with a limited 0 percent interest rate, divide your balance by the number of months until the offer expires. That's your new monthly payment.
If you can't pay off the balance before the APR expires, make as much progress as you can. When the rate expires, transfer it to a 0 percent card for the last time. Then make a plan to knock it out in the allotted time period without accruing interest.
4. Youre sacrificing savings to pay off debt.
You probably can't save much if your extra money goes toward credit card debt payments. But it's important to make room in your monthly budget to save, especially if you don't have an emergency fund to keep you from sliding back into debt if an unexpected expense arises.
How to regain control: Aim to save part of each paycheck, even if you have debt. If you don't have an emergency fund, set your first savings goal at $1,000 and make a plan to get there as quickly as you can. You can expedite the process by tightening your budget or making some money on the side and depositing it directly into your savings.
If you already have an emergency fund, start putting a small sum, such as $10, $20 or $50, in your general savings account each month. These deposits can help you reach longer-term savings goals or prevent you from falling back into debt if you exceed your budget.
5. You are constantly anxious about your debt.
It's a red flag if thoughts about your debt are keeping you up at night or if your debt is affecting your professional or family life. Your debt shouldn't make you overwhelmingly stressed.
How to regain control: If you're anxious because you don't know how much you owe or what your terms are, refer to the steps for getting out of denial above. However, if your debt load is too big to pay off, you may have to find alternatives.
You may want to consider consolidation. Choose a registered debt consolidation company by looking for positive reviews on the Better Business Bureau site, or get recommendations from trusted loved ones who have consolidated their own debt with a reputable company.
Bankruptcy should be a last resort, but it's an option if you need it. Keep in mind that bankruptcy will stay on your credit report for seven to 10 years, and it's unlikely that you'll be able to pay back student loans in a bankruptcy.
By confronting the problem and taking these steps, you can lift both the mental and financial burdens of your credit card debt.