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The Debt Adviser

Separate vs. joint credit in marriage

Dear Debt Adviser:
I married young, and as such, I don't have much of my own credit, and so I get a little bit higher rates on my credit cards than my husband does. He wants to close those higher-interest credit card accounts so we're not paying so much in finance charges, and keep just the lower interest cards that are in his name. Should I keep credit cards in my own name, even if the interest rate is three or four percent higher, so I can build my own credit? Thanks so much!

Dear Kristina:
Yes! I mean, sort of! I mean ... I love complex questions such as yours because they illustrate the reality of living, loving and lending in the lives of real people. There are multiple answers to your question, so here goes.

You are right on the money, it is very important that you have your own credit history. If you were to become separated, divorced or widowed, it would be more difficult to obtain credit without having maintained your own credit standing. No one, when happily married, likes to think of those things, but the fact remains that 74 percent of women will manage finances on their own at some point in their lives.

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While we are speaking of not-so-pleasant things, keeping separate credit card accounts protects both spouses from the debt obligations of the other, who may get into serious credit card debt. Even though you may have joint checking, savings or other accounts, you are not responsible for credit card debt in the event of bankruptcy, death, or divorce unless you are named on the account.

My suggestion is that you keep one or two cards in your name alone, but do not carry a balance on them. Have yourself added to some of your husband's accounts as a "responsible party." This means that from a credit perspective, you each will have your credit histories updated with the information from these accounts. You get a better interest rate and build future credit without having to give up your own cards. Also, one of the things considered when compiling your credit score is the length of time that you have a credit account. Closing all your credit card accounts will not only leave you with no credit in your own name; it will eliminate the history you have created with the accounts.

To understand more about your personal credit history, I recommend that you get a copy of your credit report from each of the three main credit-reporting bureaus -- Equifax, Experian and TransUnion. Review the reports for any errors and make sure that the credit card accounts in your name are reported accurately. About three months after your husband has added you to his accounts, repeat the process to be sure you show on the accounts and the accounts you closed show it. If you find any errors or inaccurate posting, dispute the items with the credit bureau on whose report the error occurred.

Now to address you and your husband's desire to decrease the amount of finance charges you are paying on your cards. Several things come to mind:

1. Pay off the balances on credit cards in your name as quickly as possible. You'll get there faster if you pay off the card with the highest rate first.

2. Use your cards only for purchases that you plan to pay off each month. Use the better interest rate cards for short-term credit needs.

3. Make payments consistently on time and you will qualify for a more competitive rate in time.

One last thing: Retirement is something that should be planned for and saved for separately as well as jointly. You can maximize your retirement savings by taking advantage of each of your employers' retirement benefits and you are eligible to defer more income from taxes with separate accounts. And, once again, if the unthinkable occurs, you are covered.

The Debt Adviser, Steve Bucci, is the president of Consumer Credit Counseling Service of Southern New England. Visit CCCS for additional debt advice or click here to ask a debt question.

-- Posted: May 16, 2003

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See Also
Unpaid bills create shaky marriage
Marriage means you share deductions
Financial advice glossary
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