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
Ohio Attorney General Mike DeWine announced that Chase has agreed to reform its credit card debt collection practices and permanently stop collection efforts on over half a million consumers as part of a $136 million joint federal-state settlement.
The settlement with Chase Bank USA NA and Chase Bankcard Services Inc. was reached by the attorneys general of 47 states and the District of Columbia, and the federal Consumer Financial Protection Bureau, following an investigation into Chase's past debt collection practices.
We start this month with a new topic: Financial Planning. Remember, you can post your questions to our website and well try and get them answered. To get us started, the first question comes from Janice, who asks:
I have several credit cards, one of which has a ridiculous interest rate (29.9%). My monthly payments seem to do little to my available credit. Im at my wits end as to how I pay it off without taking out a loan. Should I transfer my balance to another card with a lower interest rate?
To help answer Janices Question we have Rob Lyster, a financial advisor with Bankoh Investment Services a subsidiary of Bank Of Hawaii
Many folks struggle with this same issue. In fact this question is a very important part of a sound long term financial plan. Good news is there are many strategies to help folks with this; it all depends on their unique situation.
What are some of the strategies that you would advise people consider?
The first thing I advise folks to do is not carry any credit card debt and try to pay it off each month. But if folks find themselves carrying a balance they should try to avoid paying only the minimum payment. The minimum payment is mostly interest and it barely, if at all, touches the balance. You could end up paying a boatload more in interest, even more than the original balance. The more you pay to the balance the faster you pay off your cards.
Here is a story that may illustrate this. I love watching sports and I love watching them on the biggest and baddest TV with all the bells and whistles, even if I do not know what those bells and whistles do. So I decide to buy that TV with my credit card. I put fifteen hundred on the card and plan on paying the bugger off over time. Well, my card charges 29% interest and my minimum is only $37 bucks a month. If I only pay the minimum it will take me over 13years before its pau and I would end up paying over $6,000 for that TV. Now thats a boatload of interest.
Any other strategies?
You can transfer balances to a lower interest card but there are some things you may wish to consider before doing this.
1.The only way for this strategy to work is if you are able to pay more than the minimum payment
2. Check to see if the card you wish to transfer your balance to charges a balance transfer fee. This fee is normally a percentage of your transfer balance and is usually added to the balance transferred. This may just compound the challenge of paying it off.
3. Check for any balance transfer promotions, many cards run this promo quite often. These promos normally give you an initial period of low or no interest then they convert back to normal balance transfer rates. If you can pay off the balance before that initial period is over you will experience major savings on your interest.
What about consolidation loans?
If you are able to get a fixed-rate loan you will be able to budget for the payment because you will know exactly what you will pay each month and when it will be pau. Sometimes the payment you will make will be lower than what you are currently paying on your credit cards. If you do see this you may consider using that extra money to pay down this loan faster. Better yet, if you can get an equity line or loan then you tend to get the lowest rates and you may qualify for tax deductions which would lower your total cost for the loan.
Be sure to go to our Hawaii News Now and our Sunrise Facebook page and send in your questions today. We may answer it on SmartMoney Monday.