New Goal for Your New Life Together: Becoming Credit-Wise
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.
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