You share a lot with your spouse, but your credit score is not one of them. Even if you don’t earn an income and your spouse supports you financially, it’s important to establish your own credit score. Not only will your score come into play when you apply for a joint loan, but you may have to fall back on it if you ever become single again. You can build credit by using your spouse’s income on a credit card application or by becoming an authorized user on one of their cards and making on-time payments each month.
Spouses share a lot, but no matter what your relationship status is, your credit score is yours and yours alone. Even if you are 100% financially supported by your spouse or partner, establishing and building your own credit score is essential.
This can benefit both of you when you make financial decisions together. But if you get divorced or your spouse dies, having good or excellent credit can help you start making financial decisions on your own.
Additionally, maintaining some financial independence can help keep you on an equal footing in your relationship.
“A household’s financial dependence on a single breadwinner can foster unhealthy relationship control dynamics,” said Katherine Fox, Certified Financial Planner, Founder and Advisor at Sunnybranch Wealth in Portland, Oregon. , in an email. “Stay-at-home spouses who take steps to protect their credit score and financial literacy are doing their part to maintain a healthy and vibrant financial attitude within their relationship.”
WHY YOUR CREDIT SCORE IS SO IMPORTANT
Whenever you and your spouse apply for a joint loan, such as a mortgage, both of your credit scores are assessed by the lender. Lenders can use the score of the person at the bottom of the scale to determine your eligibility. Ideally, even the lower score between the two of you is still in good shape, as this can affect the loan terms, like interest rates, that you would qualify for together. A lower credit score can make borrowing more expensive.
Your credit score also comes into play when applying for a credit card in your name, which you can do even if you don’t earn an income. As long as you are 21 or older, you can include your spouse’s income on the card application.
Additionally, unexpectedly becoming single again is the most difficult reason for non-working spouses to build up their credit.
“Having a solid foundation will help you if you find yourself on your own and need capital to get started,” says Brittany Davis, a Memphis, Tennessee-based certified financial advisor who is an associate financial planner for Brunch & Budget, a registered investment advisor. “I know some people are suspicious of credit and debt, but there are so many things credit can be used for.”
Davis likens access to credit to insurance — it’s something good to have whether you need it or not right now.
WAYS TO BUILD CREDIT WITHOUT INCOME
In addition to applying for your own credit card using your spouse’s income in your application, there are other ways to increase your credit.
You can become an authorized user on your spouse’s credit card. They would be responsible for the payments, but if they pay on time each month and you both avoid charging more than 30% of the credit limit, it can increase your credit score over time. Applying for loans in both of your names, such as a car loan or a mortgage, can also be helpful, as on-time payments will reflect on both of your credit reports.
“At the very least, stay-at-home spouses should have a joint account or added to their partner’s credit card to help them build and maintain their own credit score,” Fox says.
Also, be sure to pay other household bills on time, including utility bills and rent payments. In some cases, these are also reported to the credit bureaus.
HOW YOU CAN AFFECT EITHER’S CREDIT SCORES
Although you each have your own credit score, your financial habits can help or hurt each other, especially when you have joint loans or share credit cards.
As an authorized credit card user, you are at the mercy of the behaviors of the primary cardholder. If your spouse makes late payments, it can negatively impact your credit. You’ll want to budget together because when multiple people use the same card, it’s that much easier to overspend. Becoming an Authorized User is an exercise in trust and communication.
Where you live can also be a factor in how you can affect each other. According to Fox, in communal property states, you are generally not responsible for debts incurred by your spouse before your marriage, but you are responsible for each other’s debts after marriage. But in non-community ownership states, you only share responsibility for joint accounts and debts.
And if you’re the breadwinner, proceed with caution before co-signing a loan for your spouse or other non-working loved one. It’s not like a joint loan, where both parties share the burden of debt payments, but can also share ownership of an asset.
“Co-signing is more of a risk to me because you have no guaranteed interest on the item you’re co-signing a loan for,” Davis says. “If that person fails to make the payments, you become liable for the loan, but you have no interest as the owner.”
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This column was provided to The Associated Press by personal finance website NerdWallet. Sara Rathner is a writer at NerdWallet. Email: srathner@nerdwallet.com. Twitter: @SaraKRathner.
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