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This article was featured in the Carnival Of Personal Finance: First Week Of Fall Edition.
When your spouse has a bad credit score it affects you too! It can hurt your chances of qualifying for a mortgage together and it can even have an impact on whether your spouse gets a job. Credit scores are serious business these days and a bad score has the ability really hurt your financial stability. The good news is a bad credit score can be improved. With both of you working towards improving the score you’ve got an excellent chance of turning things around. Here are some ways you can help your spouse improve their credit score.
- Check Their Credit Score: First things first, check their credit score! Before you can help improve their credit you must have a clear picture as to what is affecting their credit score. I use Credit Karma to check my score because it’s free and it’s easy to use. Be sure to address any accounts that may be in default first. You should also pull their credit report and check for inaccuracies. This is free too when you use Annual Credit Report.com.
- Get Them A Credit Card: Credit cards are a great way to improve credit or build credit. The reason is because the account activity is reported to the credit bureaus each month. This means your good habits will be reflected right away. If your partner can’t qualify for a traditional credit card then go for a secured credit card. Secured cards are designed specifically for those with bad or no credit as a way to establish a good credit history. Whether your spouse is approved for a traditional or secured card it is imperative that they manage the account responsibly. Credit cards are a great credit building tool, but if not managed correctly can also destroy a credit score.
- Add Them As An Authorized User: One way to quickly improve your spouses credit score is to add them to a credit card account an authorized user. If you have a credit card account with an excellent credit history your spouse can reap the benefits too. By adding them onto your account as an authorized user, your excellent payment history becomes their excellent payment history too. This is a quick way to give a boost to their credit score, but there are a few things you need to keep in mind. The first is that if their credit score is really bad then this isn’t going to miraculously give them a good credit score, but this will help. Second, you only want to add them to an account that has a perfect history. Don’t add them to an account that has late payments or has been maxed out. Doing so could end up hurting their credit, not improving it.
- Pay Down Any Credit Cards: Credit cards are like a double edged sword. On one hand they can help your credit and on the other they can hurt your credit. One of the best and fastest ways to improve your credit score is to pay down your credit cards. Just because your card has a credit limit of $1,000 doesn’t mean you should use it all up. As a matter of fact, it is recommend to not have a balance greater than 30% of your available limit. This means you should charge no more than $300 on a card with a $1,000 limit. Get all credit cards under the 30% mark and you will see the credit score go up.
- Co-Sign On A Loan: A portion of your credit score has to do with having different types of credit. This means you should not just have credit cards, but different types of credit. For example, having a variety of types of accounts like Credit Cards, Car Loans, Mortgages and Consumer Finance Accounts will help your credit score. If your spouse can’t get a loan in their own name then consider co-signing to help them secure the loan.
- Make All Payments On Time: Payment history is perhaps the single most important piece of the credit score puzzle. Late payments have the power to hurt your credit score for years to come which is why it’s so important to be on time with your payments.
It’s easy to get discouraged when you or your spouse has credit score that has seen it’s better days. By teaming up together, you can help each other stay motivated and disciplined. Like the saying goes, “two heads are better than one”, even when it comes to your credit score!
Photo Credit: via Flickr Dabe Murphy