The New Year is quickly approaching, and you may be pondering some goals for the New Year. Resolutions don’t always have to be about getting fit and healthy – maybe it’s time to look into sprucing up your credit score?
Know that you don’t have to go in it alone. There are several ways that your spouse can help you establish your credit and increase your credit score – or vice versa. It is important for the both of you to maximize your credit potential. Why you ask?
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.
- 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.
- 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.
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.
- 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 her how to spot red flags and stress the importance of disputing errors and keeping that report as accurate as possible.
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
If you have any questions please feel free to contact us here, or give us a call at 1-877-672-4543.
This article originally posted on, money.usnews.com.