Your spouse has a lot in common, but regardless of your relationship status, your credit score is yours and yours alone. 100% financial support from your spouse or partner Establishing and building your own credit score is essential, even if you’re not.
It can benefit both parties when making financial decisions together. But if you get divorced or your spouse dies, having good or very good credit can help you make your own financial decisions.
Besides, by maintaining some degree of money independence, keep two people on equal footing in your relationship.
Katherine Fox, Certified Financial Planner, Founder and Advisor of Sunny Branch Wealth in Portland, Oregon, said in an email. “Stay-at-home spouses who take steps to protect their credit scores and financial literacy are doing their part to maintain healthy money attitudes and dynamics in their relationships.”
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Why your credit score is just as important
Whenever you and your spouse apply for a joint loan such as a mortgage, both of your credit scores are evaluated by the lender. score may be used. Ideally, even the lowest score between you both is still in good standing as it can affect loan terms such as interest rates. It can be expensive.
Your credit score is also relevant when applying for a credit card in your name. This can be done even if you have no income. If you are 21 or older, you can be included. Spouse income on card application.
Additionally, unexpectedly becoming single again is the hardest reason why an out-of-work spouse needs to build credit.
Brittany Davis, Associate Financial Planner at Branch & Budget, a licensed financial counselor and registered investment advisor based in Memphis, Tennessee, said: “I know some people are skeptical about credit and debt, but there are many things you can do with credit.”
Davis likens access to credit to insurance. It’s nice to have, whether or not you need it at the moment.
How to Build Credit Without Income
There are ways to build credit besides using your spouse’s income in your application to apply for your own credit card.
you can become Authorized User Spouse’s credit card. They are responsible for making their payments, but if they pay on time each month and both of you avoid being charged more than 30% of your credit limit, over time this will increase your credit score. may rise. Applying for a loan in both names, like a car loan or a home loan, can help because timely payments will be reflected on both credit reports.
“At the very least, stay-at-home spouses should be joint account holders or added to their partners’ credit cards so they can build and maintain their own credit scores,” says Fox.
Make sure to pay other household expenses on time, such as utility bills and rent payments. In some cases, they are also reported to credit bureaus.
How we can influence each other’s credit scores
Each has their own credit score, but money habits can help or hurt each other. Especially if you have joint loans or share credit cards.
As an authorized credit card user, you are subject to the actions of the primary cardholder. If your spouse is late with payments, your credit can be adversely affected. It’s easy to overspend when multiple people use the same card, so you should set a budget for each other. Becoming an Authorized User is a practice of trust and communication.
Where you live can also be a factor in how you can influence each other. We are not responsible for each other’s debts, but we will be responsible for each other’s debts after marriage.However, in non-community property conditions, only you share responsibility For joint accounts and debts.
Also, if you’re an income earner, be careful before co-signing a loan for a spouse or other loved one who doesn’t work. , unlike joint loans, where ownership of assets can also be shared.
“Co-signing is more risky in my eyes because there is no security interest in the item co-signing the loan,” Davis says. “If the person fails to pay, you are responsible for the loan, but you have no interest as an owner.”
This article was written by NerdWallet and originally published by The Associated Press.
The article Why Building Credit Is Essential for Stay-at-Home Spouse originally appeared on NerdWallet.