Category: CREDIT BLOG

Most people approach marriage and credit with a one-for-all, all-for-one attitude. They open joint credit cards, apply for car loans as a couple, and stop building separate credit histories. After all, they have joined their lives together; why not marry their credit histories?
Though the sentiment is appealing, keeping some credit accounts separate has big advantages. Holding credit jointly puts a couple at even greater risk during times of financial crisis. Here are two common credit pitfalls of marriage.
Pitfall #1: Joint Credit Cards and Automobile Loans
Let’s imagine what would happen in a typical household by considering Jack and Jill, a married couple with joint credit cards and joint automobile loans.
Jack lost his job, so the couple is trying to make ends meet. After a couple of months, they start realizing that they cannot afford all of their bills. So they stop making payments on several credit cards and on one of the two car loans. The credit card bills are sent to collections and the car is repossessed.
And both Jack and Jills’ credit scores are in the trash.
Now let’s see how the same situation would play out with Peter and Paula, a married couple with separate credit cards and automobile loans.
When Peter loses his job, the couple creates a strategic plan about their forthcoming financial problems.
Peter and Paula know they can only afford to pay all their bills for three months; the money will run out after that. Peter searches high and low for a job, but is unsuccessful. After three months have passed, the couple decides to stop paying credit cards and car loans in Peter’s name. They stay current only on bills in Paula’s name.
Of course, Peter’s credit score suffers. But Paula’s remains pristine. This means that Paula is able to apply for loans in her name, while Peter learns how to rebuild credit.
Opening all loans jointly is among the biggest credit-scoring mistakes a married person can make. Let’s take a look at another one.
Pitfall #2: Holding All Credit in One Spouse’s Name
Opening all credit cards and loans in one spouse’s name is another big no-no for married couples.
This usually happens when one spouse works a nine-to-five job and the other stays home with the kids. The spouse with the paycheck opens all credit in his or her name.
But what happens if something happens to the working spouse? A bankruptcy, death, loss of income, or divorce would make the other spouse vulnerable. Because no credit is the same as bad credit, the stay-at-home spouse would have no ability to secure a loan.
There’s another problem with this strategy. Let’s switch this scenario up a bit and imagine that both spouses work. The wife has a part-time job with a small salary, so all of the credit is in the husband’s name. The couple decides to buy a home. To qualify for a loan, they need both spouses’ income.
The couple now has a big problem: The wife has no credit history, so her score is low. Putting her name on the home loan would endanger the loan. And the husband cannot qualify for the loan on his own—he needs his wife’s income for that extra boost.
Most likely, the couple would not qualify for the loan. At a minimum, the couple would pay a higher interest rate.
This pitfall can be avoided if both spouses build their own credit scores.

A low credit score is bad news, particularly if you are trying to renegotiate the terms of a loan, applying for a home loan, trying to land a job, or searching for an apartment. In today’s environment, you need a high credit score for a slew of reasons. So if you need to build your credit score, don’t worry. Here are three strategies to boost your low credit score, and fast!
1. Correct your credit limits. Almost half of Americans have a credit card with a limit that is incorrectly reported to the credit bureaus. Credit card companies often omit or misreport credit card limits to the credit-scoring bureaus.
This causes your utilization rate (your balance expressed as a percentage of your limit) to appear higher than it actually is. Imagine that pay your Visa balance down to $300. Because your limit is $1,000, your utilization rate is 30 percent, which is the maximum utilization rate the credit-scoring bureaus want you to have.
So your score should increase, right? Not so fast. If the credit card company is only reporting a $500 limit, you will appear to be carrying a 60 percent utilization rate. And this hurts your credit score.
Are you one of the many Americans suffering from this mistake? Find out by pulling your credit report from www.720FicoScore.com. If the credit card companies are inaccurately reporting any credit limit of yours, immediately begin the process of correcting this mistake by using the forms and worksheets necessary to correct this mistake.
2. Become an authorized user on a credit card owned by a family member or spouse. If you have fewer than five credit cards, becoming an authorized user on a family member’s credit card is one of the quickest ways to improve a credit score, so long as you choose an account with a clean credit history. Becoming an authorized user allows you to borrow the account holder’s clean credit history, which will cause your low credit score to quickly increase.
3. Find creative ways to lower your utilization rates. Your utilization rate is the balance you have on each individual credit card expressed as a percentage of the limit. If your limit is $4,000 and your balance is $2,000, your utilization rate is 50 percent. If your balance decreases to $1,000, your utilization rate drops to 25 percent.
The credit-scoring bureaus respond best to people with utilization rates below 30 percent. If you have a high utilization rate, your low credit score can start to improve by getting your utilization rate below 30 percent.
Obviously, you can lower your utilization rate by paying down your balance. You can also lower your utilization rate by transferring a portion of your credit card balances to credit cards with higher limits, or asking your credit card companies to increase your limits.
If you have fewer than five credit cards (the maximum number you should have), you could also open a new credit card that holds some of your debt. Keep in mind that opening a new credit card will cause your score to drop initially, but so long as you keep the balance below 30 percent and make timely payments, your score will start to improve in about six months.
And if you are married, be sure to read my article about how to build credit fast by transferring balances to your spouse’s credit cards.

Unless parents decide to make a concerted effort to begin teaching children about credit, our nation’s children might become victims of a system that is deceptive, manipulative, and cloaked in mystery.
Our banks, educational institutions, and government officials do not make information about credit easily accessible. They do not tell us that no credit is as bad as poor credit. They do not tell us that we might be unable to rent an apartment or secure a job if our credit scores are low. They do not tell us that we could pay thousands of extra dollars in interest if we have a mistake on our credit report.
Banks and educational institutions certainly do not think it is their responsibility to conquer the critical task of teaching children about credit.
Because of all of this, parents would be wise to start teaching children about credit when they are young. Otherwise, parents might be sending children into a world that measures reputation by a three-digit credit score without a wink of knowledge about handling credit responsibly.
Moreover, teaching children about credit, as well as how to manage credit, will help parents raise financially responsible adults, and it will open doors for children.
When I counsel people about how to build credit, they are always shocked when they first hear my method for teaching children about credit. Here it is, and you might think I’m crazy…
I think you should add your children as authorized users to one of your credit card account, so long as it is in good standing.
I know this makes me sound crazy, so let me explain.
By adding your children as authorized users to an existing credit card account, you will give your children the opportunity to “borrow” your good credit score, which means their credit scores will begin to increase.
At the same time, you can guard your credit by keeping credit cards away from your children. When you establish your children as authorized users, most credit card companies will send your children credit cards. You can request that the credit card company not issue a card to your children, or you can shred the credit card when it arrives. In this way, your children’s credit scores will benefit from the behavior on your account, and your credit will be protected.
Though I recommend that you add your children as authorized users before they turn 14 years old, you can add them at any age. After all, a two-year-old added as an authorized user will have 16 years of positive credit under his belt by the time he reaches adulthood.
The second part of teaching children about credit is to begin an educational platform whereby your children learn about interest rates, budgeting, savings, and credit scoring. Once your children begin demonstrating that they understand the value of money and are financially responsible, you might want to provide children with credit.
Start by establishing a Bank of Mom and Dad. If your son wants to buy something, lend him the money and create a weekly or monthly payment plan. Then insist on timely payments that include interest, just like a credit card company would do. If your child is late, assess a late payment fee as part of your strategy for teaching children about credit.
Once your child demonstrates continued financial responsibility, consider providing an actual credit card to your teenager. I suggest that you allow your child access to the card only long enough to hand it to a cashier, and only if you are present. This way, the child will not be able to memorize the credit card number, nor will he have prolonged access to your account.
As part of your strategy for teaching children about credit, make sure that your children pay interest and, if they exceed the prearranged limit or fail to make a payment by the due date, you should access an over-the-limit fine or late payment penalty. You should also insist that your children pay you instead of the credit card company. Because you are the primary cardholder, you can preserve your credit by making payments on the account regardless of whether your children are paying you.
When the credit card statements arrive, sit down with your children and explain the statements. Discuss your annual percentage rate, annual fees, late penalties, over-the-limit fines. Ask your children to verbalize their plans for paying their loans in a timely manner.
Expect your children to make mistakes, and help them create plans for correcting their mistakes. If they splurge and end up owing more than they can afford, perhaps they can do extra housework in exchange for an increased allowance. And, of course, teaching children about credit means that you call their cell phones—perhaps at 8 on a Saturday morning—to inquire about any late payments!