Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006).
Dear To Her Credit,
I would like to add my wife to my credit card as a joint account holder to help her credit. My current credit score is in the high 700s. Her score is below 600. She is in collections with multiple agencies and has a total debt of $14,000.
Would my credit score be affected just by adding her to my account? Or would it make a difference to her credit if I add her? -- Andy
Dear Andy,
Adding your wife as a joint account holder to your credit card will help her score. According to Andy Jolls, CEO of VideoCreditScore.com, each individual has his or her own credit score, based on the accounts in his or her name. Jolls says, "If he adds her to his card, and continues to keep that card utilization at 20 percent, then her score is likely to improve." Not only will her credit report show an account with a good history, but her ratio of debt to available credit will go down. (Note that she must be a joint account holder, not just an authorized user, for this to help.)
Your keys to getting into the 700-plus credit score club
Having a solid credit history with a credit score over 700 will open doors to money-saving opportunities -- from low-interest mortgages and loans to lower APR credit cards, better insurance rates and even jobs. Here are a slew of tips that can help get you and keep you in the 700-plus credit score club.
Adding her to your account will not negatively affect your credit score. Of course, make sure you stay current on your payments and your average balances remain the same.
To help your wife improve her credit, remember these tips:
DO:
Sit down together and talk about your financial goals. We make assumptions sometimes that other people have the same goals we do. Talking about your goals together can be exciting -- even fun. Dream a little, and find out where the two of you want to go together.
Find out how each of you feels about financial security. For some people, it's very important to have a perfect credit record, two months' pay in the bank, and a steady income. Another person may be quite comfortable as long as they can afford to pay bills at the last minute.
Create a monthly budget together. When you live together, you need to agree on major budget decisions even if you keep most of your finances separate.
Make a list of all your debts and hers, including information about minimum payments, balances and interest rates. You can download a free Microsoft Office Excel worksheet from my website.
Make a plan to pay off all consumer debt, starting with the debt with the highest interest rate.
DON'T:
Think adding her to one account will fix a bad credit record. It will take more than one good account in her name to pull her scores up from the 500s -- especially if she has bills that have gone to collections on her report.
Merge all your bank accounts until her credit is improved. Jolls says, "Each of you should have your own personal cards and also establish some joint cards." Do not add yourself as a joint account holder to any of her existing accounts. You need at least one of you to keep a stellar credit score.
Let the balance on your joint account start building up, or your credit score will suffer.
At $14,000, your wife's debt is not insurmountable. In fact, it's not far above the average consumer debt for the American household.
Late payments and other credit dings don't stay on the report forever. No matter how discouraging a person's credit past may look, it can always be made better -- and it takes less time than you think. You and your wife can build a better credit history for her, starting today.
Sally Herigstad answers questions about credit every week for CreditCards.com. Herigstad is a certified public accountant, author and speaker. She also writes regularly for MSN Money, Interest.com, Bankrate.com and RedPlum.com, and has been a guest on Martha Stewart radio and other programs. You can read more about personal finance and download free budgeting worksheets at her website: www.sallyherigstad.com
To Her Credit answers a question about a debt or credit issue from a CreditCards.com reader each week.
Send your question to Sally.
Published: July 25, 2008
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