What You Need to Know About New Rules That Impact the Ability of Spouses to Build Credit
A military spouse, like his or her significant other, must be largely self-sufficient and ready for anything. Whether it's learning of a short-notice deployment or being stop-lossed, the show must always go on at home. That's why it is so important for every stay-at-home military spouse to adapt to new rules that prevent them from using their household income when applying for credit under their own names.
As we all know, your credit standing is very important given that it not only affects your credit card and loan rates, but also your insurance premiums, job prospects, and even your ability to rent an apartment or lease a car. It's easy to feel secure if your significant other has a strong credit score, but being prepared for anything means you have to consider what would happen in the unfortunate event of divorce or death.
In the face of such a disaster, would you really want the added pressure of basically starting over from scratch financially – going from never having your financial responsibility questioned to having to prove you're trustworthy? Of course not, which is why it is important for your personal credit standing to be strong.
To build and maintain a solid credit score, you'll need a loan, line of credit, or credit card reporting positive information to the major credit bureaus on a monthly basis. Credit cards are obviously the most attainable of these options, and they don't require you to incur any debt in order to reap credit building benefits given that account information will be relayed to the credit bureaus on a monthly basis even if you have a $0 balance. Luckily for stay-at-home spouses who don't have the individual income to meet the new application requirements, there are still a number of ways to get approved for a credit card.
Most notably, you and your significant other can apply for a joint credit card account. Many banks offer such accounts, which require both parties to provide their Social Security Numbers and financial information when applying. If approved, both parties will then be liable for any debt incurred, and usage information will be reflected in both of their credit files. Keep in mind that this is different from being an authorized user, which provides some credit building benefits, but not anything like being a primary accountholder.
If you decide to go this route, just make sure to set up automatic payments from a joint checking account or clearly establish whose responsibility it is to ensure that payments are made on time each month. You wouldn't want a lack of communication to damage your credit. Similarly, if you're concerned about overspending, you can apply jointly for a secured credit card account. Secured cards require that you place a refundable security deposit that acts as your credit line, ensuring that you cannot spend more than you can afford to pay back and that the credit card company will get repaid.
It's also important to note that if you are unable to apply for a joint credit card account for some reason your assets could enable you to qualify individually. Credit card underwriting rules technically dictate that you must display either the independent income or assets to make monthly minimum credit card payments, which can be as low as $15. Therefore, even if you don't have a steady cash flow, your possessions could serve as collateral, making issuers comfortable extending you credit.
Ultimately, the good news is that while the new underwriting rules make it harder for stay-at-home spouses to access credit and therefore maintain a solid credit score, there are still ways for both you and your significant other to keep positive information flowing into your respective credit files.
Odysseas Papadimitriou is the founder and CEO of Card Hub, a leading U.S. credit card and gift card portal, as well as Wallet Hub, the first personal finance social network. His expertise in the personal finance industry extends from marketplace development and marketing strategy, to credit risk management and underwriting. He contributes regularly to many leading publications, including The Washington Post, Forbes.com, TheStreet.com, The Huffington Post, Fox Business, and U.S. News & World Report. Odysseas holds an MBA from Duke University and a BS from Brown University.
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