Improve your spouse?s credit score: 5 tips
Authorized user accounts, secured cards can boost your partner?s credit
Personal finance journalist with an eye for industry news
Marriage is all about helping one another through life’s challenges, and building credit is often one of them.
Many marriages often include one partner with a stellar credit score and another with a troubled or nonexistent track record of managing credit. But is it necessary for both spouses to have excellent credit, when a mortgage or an auto loan can be obtained in just one partner’s name?
Experts believe it’s important for both people in a marriage to be able to stand on their own two feet with regard to credit.
“Credit is a lifeline in many ways,” said Jerry Nemorin, CEO of LendStreet. “It gives you access to resources in times of emergency at a price point that is reasonable.”
If both spouses have good credit – FICO scores of 700 or above, for instance – each person can qualify for different types of loans and credit cards, potentially maximizing their total buying power and rewards savings.
Conversely, if there’s just one “good” credit spouse and the relationship suddenly ends, the other may be unable to qualify for most types of credit – or have to pay for it dearly.
Ways you can help your spouse improve a credit score
Fear of the latter scenario drove John Crossman, who owns a real estate firm in Orlando, Florida, to take out and pay off a series of small loans for his wife Angela, who had no credit history when they married. Crossman said his wife now has a perfect credit score of 850.
What else can you do if your husband or wife has used little or no credit, or has made recent credit mistakes such as a missed payment or a maxed-out card? Here are a few things you can do to carry your spouse over the threshold of good credit, while keeping in mind the five factors of FICO’s traditional scoring model.
1. Add your husband or wife as an authorized user to your card
If you add your spouse as an authorized user to a card you own, he or she will inherit the history of that card account. It’s a nearly instant way to help your partner beef up a thin credit file or recover from past credit missteps.
David Yu, a financial planner from California, helped his wife improve her credit score from below 600 to 740 over two years. Her score had been low due to a few missed payments, but she recovered from the damage with a combination of authorized user accounts and one new card of her own.
“She had a few store cards and that’s about it,” Yu said. “She didn’t close any accounts, and I had her open up a credit card through Capital One. We didn’t really charge anything on it, but just kept it open and paid the annual fee every year.”
Yu also added his wife as an authorized user to four of his cards, which had no missed payments, a combined credit limit of $140,100 and a 40 percent overall utilization rate.
2. Help your spouse apply for a small loan
A small personal loan with a low interest rate can be a great way to establish credit or improve your credit score – as long as you pay on time, every time.
Real estate investor Eric Bowlin used a secured loan to help his wife Jun – a native of China who’s now a U.S. citizen – establish a credit file.
“When we purchased our first home, she wasn’t allowed to be on the loan or the title because it would have killed our chances at getting the loan,” Bowlin said. “So, we set out to change that.”
Bowlin helped Jun secure a low-interest loan with a one-year repayment plan by putting down a $2,000 deposit. After the loan was repaid, his wife was able to get her own credit card with a small credit limit. Bowlin said Jun now has a credit score of 780.
3. Ask your spouse to apply for a secured credit card
A secured card can be a useful credit-building option because you don’t need good credit to qualify for one. Getting a secured card requires you to put up a cash deposit that establishes your credit limit. Some secured card issuers allow you to “graduate” to one of their unsecured cards after several months of on-time payments.
4. Review your spouse's credit report together
If your husband or wife is responsible with credit, but still has a mediocre score, credit report errors may be to blame. Fortunately, every consumer is entitled to a free credit report from each of the three major bureaus – Equifax, Experian and TransUnion – per year, and it can be obtained at AnnualCreditReport.com. You can also check your credit report and score for free at CreditCards.com.
If your spouse finds any errors in his credit report, file a dispute with one of the credit bureaus. Once the error is removed, any credit score points your significant other may have lost due to the mistake should soon be restored.
5. Have a frank discussion about managing money
If there’s a wide disparity between your credit score and your spouse’s, chances are you may have different money management styles. One spouse may be a miser who saves every penny and has never missed a credit card payment, while the other is a free spender who has made a credit blunder or two in the past.
If that’s the case, the spouse with the higher score can counsel the other on better financial habits and even offer to keep track of the household budget.
“It certainly takes time, but I think couples have to begin to identify their money management style,” said Carolyn Washburn, a professor of family consumer science at Utah State University. “Am I able to save? Am I just totally a spender?”
However, it’s important to avoid discussing finances in a confrontational or accusatory manner. If your spouse feels as though he or she is being scolded for poor money habits, the conversation could quickly turn into an argument.
Credit has a big impact on your family’s future
Getting on the same financial page with your spouse is similar to establishing a healthy household diet or exercise regimen. It’s mutually beneficial as long as both of you are fully invested in making improvements. And if one of you is already “advanced” when it comes to credit, it only makes sense to help your loved one get there, too.
Married life is full of big expenses – houses, cars, vacations, college – but those things can be more affordable if both spouses are able to wield high credit scores in front of lenders.
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