Separate vs. joint credit
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!
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.
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,
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
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