This article is of particular importance to a married person with most of the household’s financial accounts in the other spouse’s name.  

We’ve seen several occasions over the years where a change-of-life event can leave one spouse without a credit history and facing challenges with financial institutions and other companies.  Often senior citizens have a traditional relationship with the husband being the breadwinner and main financial support for the family and the wife being a stay-home mom or part time employee out of the house. 

According to Scott Forgues, Financial Advisor with Carlin Financial in Tucson, Arizona, the topic of both spouses having established credit ratings is being included in financial planning discussions with clients.  With the increasing importance of credit scores in today’s society, it makes sense for older couples to cover their financial security and money issues with pre-planning and take steps to assure that both spouses have established a good credit history.

WHAT TO DO
1) Review both spouse’s credit reports.  You can do this at no cost on the internet or through the mail.  You can also get reports with actual FICO scores to check your own credit rating.  Click here for details on both of these.

2) If one spouse does not have a credit file at all three of the credit bureaus, they should consider building their good credit.

3) If there are joint accounts, such as mortgage or auto loans, be sure that they are reporting on both parties’ credit reports.  If not, contact the lender or financial institution to request that they report the joint account to the credit bureaus for both of you.

4) The person wanting to build their credit can open a credit card account to be used ONLY as a credit building tool – NOT to carry a balance and go into debt with.  Ask at the bank where you have your checking and savings accounts; they may be more accommodating to a customer with an existing good relationship.  You can also consider opening a secured credit card, ask your bank if they offer them. 

When you have the new credit card account, use it ONLY for a small purchase of something you need to buy anyway, such as a tank of gas or a pair of socks.  Then pay the bill in full when you receive it the next month.  Put the card away in a locked, safe place and don’t use it again for three months.  Do the same thing in three months: a small purchase of something, pay it off in full, store the card in a safe place for another three months.  Continue this way to build up a good credit history that can be included in the credit scoring formula.

5) The spouse with the established credit can add the other spouse to one or two of their revolving accounts as an Authorized User (AU).  The person who has the account needs to contact the company that issued the credit card and request that their spouse be added as an AU.  They will need full name, date of birth, and Social Security number of the person to be added to the account.  This is NOT the same as adding an “additional card holder” to the account.

NOTE:  The Authorized User is not financially responsible for the account.  However, if the account becomes delinquent or goes into collections, it will be reflected on both parties’ credit reports.

Because of some instances of misuse of the Authorized User strategy for credit building, the FICO scoring formula was changed and newer versions do not include AU accounts in the credit score.  However, most lenders are still using older versions of the FICO score that do include AU accounts.   More information can be found here.

6) Check your credit reports and scores again in six months to see if there is now a credit score for the spouse who previously had the “thin file”.

You can get a Credit Check-Up for only $100 with us to see exactly where you are now and obtain effective credit building strategies for your financial future.  Contact us today for more information.