New Goal for Your Marriage: Becoming Credit-Wise Together.
Many people planning to be married take time to reexamine financial
priorities, set a new budget, and establish savings or debt reduction
goals. Being credit-wise consumers means realizing that managing your
credit requires similar planning and care-and doubly so when you are
entering into marriage.
Think about your special personal and financial goals for the coming
year. Are you planning a major purchase or a trip abroad? Are you
working to establish financial stability and security? Since good
credit takes time to build, planning for your future together should
include checking your credit report. This is a great time for each of
you to request a copy of your credit reports and look them over--not
simply for inaccuracies, but for ways you might improve your overall
credit status.
Many of life's major changes, such as marriage, can impact your credit,
but keeping these credit-savvy tips in mind can help you keep and build
your credit together, so it's always available when you need it.
Your Marriage and Future
Getting married brings many financial opportunities to couples who can
combine their resources. As you plan your wedding day, plan for your
future too and take these steps to keep your credit in tip-top shape.
Notify creditors and credit bureaus if you change your name. When you
change your name at marriage--or any other time--it's important that
you make sure your creditors and the credit bureaus are notified of the
change. Otherwise, you might lose your credit history.
Keep credit in your own name in addition to joint accounts. Women
especially must take care to keep some credit in their own name. (e.g.
"Jane Smith" rather than "Mrs. James Smith"). Every year women who have
never paid a bill late are denied credit because they have no credit
history in their own name.
If either you or your spouse-to-be has had trouble getting credit
alone, try setting up a joint account to capitalize on your shared
income and/or one person's stronger history. As your joint account
history grows, you should each acquire and maintain an account of your
own as well, to establish your credit on an individual basis. As you
establish individual accounts, you might close some extra joint
accounts, keeping only those you actually use.
If you anticipate making a large purchase with one of your credit
cards, you might want to request a credit line increase now, so you
know the credit is available when you're ready to buy.
Building Good Credit Together
When you apply for credit, the lender will undoubtedly check
your credit report. The information in your credit history helps
lenders decide how much credit and what interest rate you are eligible
for. The better your credit history, the more likely you are to qualify
for the best credit deals, including rates on a mortgage. But what will
creditors be looking for?
Pay Your Bills on Time
Creditors always look for indications that the prospective
borrower is a good credit risk: a person who will pay back his or her
debts in a timely fashion. Obviously, a history of on-time payments
demonstrates that you are just such a person. But that doesn't mean
your credit history must be perfect for you to qualify--few people's
are, after all. "Good" credit can include a few minor dings in your
report, such as up to two credit card payments 30 days late or one
installment payment, such as an auto or student loan payment, 30 days
late. No payments of any kind should be more than 60 days late and
there should be no outstanding public record debts such as judgments or
liens.
Keep Your Debt Load Reasonable
One factor any creditor must assess before offering credit is the total
debt of the person applying. If a large portion of your income each
month is already committed to paying off other debt, the lender will
wonder if you may have trouble paying back an additional loan. As a
rule of thumb, financial experts say that non-mortgage debt payments
should not exceed 10-15% of your take home pay each month. If your
debts are currently too high, consider ways to pay some down before you
apply for new credit.
Avoid Unnecessary Inquiries
Whenever you authorize a creditor, employer, or other
business to check your credit report, an "inquiry" is added to the
report itself--a note that someone has checked your credit. An inquiry
usually stays on your credit report for two years. A lender considering
you for a loan will look at the number of inquiries recorded there and
when they took place. A large number of inquiries occurring in a short
period of time may be interpreted as a sign that you are either
applying for lots of credit because of financial difficulty or
overextending yourself by taking on more debt than you can actually
repay. (Checking your own credit report, however, does not impact your
credit rating.) Therefore, it's always a good idea to minimize
inquiries into your credit report. If you're shopping around for
mortgages, for example, don't let every lender you consider run a
credit check. You might have to settle for slightly more approximate
estimates on what the lenders can offer you, since they can't verify
your credit history. But that's still better than doing all that
shopping around only to find that the lender of your choice now
perceives you as a less solid credit risk and wants to charge a higher
rate.
Eliminate Excess Unused Credit
Just as a high number of inquiries suggests you may be overextending
yourself, a lot of available credit means you have the capability to
overextend yourself in the future, even if you have not done so in the
past. Although people may perceive having several credit cards with
high limits a sign that they have good credit, too much of this good
thing can make them seem like a poorer credit risk. The lender needs to
be reasonably sure that you will continue to be able to repay your debt
in the future. But if you have thousands of dollars of unused credit
available, you might spend it all the month after your loan goes
through and suddenly have more debt than you can pay off. To prevent
this concern from arising, you should close unused credit accounts
before applying for a large loan, and/or consider having your credit
limits reduced. If you do either of these things, make sure to ask the
creditors to record that the account was closed or changed at the
consumer's request--you don't want anyone to get the impression the
bank closed the account because of problems with your payment habits.
Of course, as with most worthwhile plans, building good credit together
requires a long-term commitment. So set your credit-wise plans for your
new life together in motion now and stick with them. By doing so, you
may reap the benefits of that commitment for a long time to come. Click Here.
