People can go back and forth about whether or not joint bank accounts are the best things for a couple. And there are good points on both sides. Joint accounts take care of the question of whose account pays for which bills, for example. But other people like to keep things separate, either because that's just how they like to run things or because their spouse doesn't have the same money spending or saving habits they do.
There are similar issues for credit cards.
A joint account can be a good idea, as either of you can use it and most purchases will probably be for both of you, but it can also have some bad points.
The Good Point
For the one with the lesser credit score, getting a card together is a chance to get better credit. The card will still need to be paid properly. But if you can both keep from making mistakes you can bring the lower score up over time.
The Bad Points
The flip side of someone with a good credit score getting credit with someone who has a lesser credit score is that if they continue to make mistakes your credit score can go down too. Any combined accounts will impact both of your scores.
This also means that if one of you starts having trouble with money or starts abusing credit, it's going to impact both scores. While most people trust their spouse, things happen. It's not always about being unreliable. Sometimes it's just a bit of bad luck.
Many couples will be able to rely upon each other's credit with no problems whatsoever. Whether or not you combine or get new joint accounts, the most important thing is to keep each person's credit score in good shape.
Why?
Let's assume you come to a time where you can buy a home. Odds are both of your names will be going on that mortgage. You're buying a home together, after all. If one of you has a poor credit score you will both be stuck with a higher interest rate on your mortgage.
Remember that the only way your credit scores interact with each other is on your joint accounts. If you have trouble keeping up with a joint account, it will impact both scores. But if you keep all your credit accounts separate, problems for one will not mean problems for the other. The credit bureaus do not care if you're married. Their only interest is how you treat your credit.
Your credit score gets tabulated based on a number of criteria, which is supplied to the credit bureau companies by lenders themselves. They report when you've been naughty, they report when you've been nice. This data and other factors make up that score, which varies slightly between the three major credit bureaus, you weigh certain categories more or less than the other two when determining scores.
Your credit score, or FICO score after the Fair Isaac Corporation, is the prime factor in whether you'll be approved for a loan or not, and what interest rates you'll get on that loan. It also has an effect on your insurance rates, and may even affect your ability to get a job, with more and more employers consulting the reports to determine the reliability of the applicant. FICO scores range on a scale from 300 to 850, with higher scores being better, an 850 score pretty much representing a spotless history and outlook, which is actually quite rare. In general, you need a score upwards of 700 to qualify for most loans and get better rates on them than you otherwise might. We'll look at some of the basic tips you can use to help improve your score to get those juicy loans and rates.
Pay bills on time
Yeah, this is about as basic a concept as you can get, yet most of us are late on bills multiple times throughout, often for reasons that aren't even related to money. Depending on how the bill must be paid, we may be too lazy to go out and take care of it, or may simply forget to pay it on time. Make it a habit of leaving all of your bills in a prominent location where you won't forget about them, and don't dilly-dally on paying them. Even a day late could be enough to scar your credit score.
If you're late with a payment for whatever reason, at least make it a point to contact the creditor and explain the situation, while clearly defining when payment will be made. As a sign of good faith, and especially if you've had a good payment history to that point, creditors will often avoid contacting the bureaus about your late payment. Communication with your creditor is the key, like it is in so many other relationships.
Keep low balances on your cards
Rather than paying off your credit lines in full each month if you have that capability, leave a small balance owing on the card each month, demonstrating to potential lenders that you can handle money responsibly and are not simply making the payments each month because your financial situation allows it. You'll be paying a small amount extra each month by going this route, but the increase in your credit score could equal plenty more in savings down the line.
Avoid too many new accounts
While it may be tempting to open a good number of accounts for the sake of options, and you may in fact think that this helps your score as well by demonstrating you can handle multiple accounts and keep them in good standing, it will in fact hurt your credit score. The more accounts you have makes you a greater credit risk, no matter your past payment history. New accounts will also weaken your accounts' average age, which also plays a role even in your .
Both Stephanie Foster & Darren Cason are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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