Tips for Women on Building Their Credit Score
by Bill Hardekopf
Women and Financial Security
Women are managing families and careers, but they must also manage their own personal finances. The Labor Department estimates that nearly 90 percent of women will manage their own finances at some point during their lives.
One of the key things for a woman to know is the importance of her credit score. Since this directly affects her financial future and the rate she will pay for any loan, women of all ages and stages must understand and take positive steps to build their credit score.
Whether a woman is single, married, or divorced, building a credit score starts with establishing credit in her own name.
If you have never had credit, or if the credit you use is listed in your husband's or parent's name, a woman should immediately start building credit in her name. Your goal should be a FICO score of 760 or higher. You will then qualify for the lowest rates.
Here are tips for women on building your credit score at each stage of your life:
1. Single or Just Starting Out
- Start with opening a checking or savings account. This shows you can handle money in a responsible manner.
- Apply for a credit card that is in your name only. The easiest time to do this is while you are in college. If you wait until after college, it may be more difficult to get a traditional credit card with a low rate. If you are not accepted with the first or second application, apply for a secured card or a credit card from a department store or other retailer. These cards are usually easier to get than credit cards issued by banks, and they'll help you build a credit history. However, these cards have higher interest rates and lower credit limits. If you get a secured card, make sure the card reports your credit activity to the credit bureaus.
- Build a good payment history. Make your payments on time for all of your bills. Pay your full credit card balance every month.
- Keep your debt-to-credit limit ratio low. Add up all of your credit card debt and divide it by the credit limits on all your cards. Keep your ratio under 30%. The lower your ratio, the better off you will be.
- Choose your loans and lenders like friends you want to keep. Longevity and history matter on your credit score. Be selective about the credit card accounts you open, and keep them open, even if you don't carry a balance and rarely use a credit card.
According to the FTC, there are two common reasons women don't have credit histories in their own names: (1) they lost their credit histories when they married and changed their names; and (2) creditors reported the accounts shared by married couples in the husband's name only.
- Stay involved wih all financial decisions. Don't leave this to your husband. Keep up with bank accounts, retirement accounts, insurance, etc. If your spouse has difficulty managing money or makes bad financial decisions, you will also be responsible for the consequences. Being uninformed about your finances could also put you in a very difficult position if the marriage ends.
- After you get married, notify all creditors of your name change. If you have used credit with a different name or in a different location, make sure that the credit bureau correctly and accurately transfers this information to your credit report.
- When you order utilities or apply for a mortgage, loan, or credit card, make sure it is set up as a joint account. The creditor will report the account activity to credit bureaus in both names. If you put everything into your husband's name, your own account will go inactive, dropping your credit score.
- Even after you marry, keep your own credit identity. Have your own credit card so that your activity will help build your own credit score. It is a good idea to have your own checking or savings account as well. Have your own retirement savings account through your company or an IRA.
You aren't just separating your lives, but your finances as well. If you do this correctly, you can avoid a financial mess and go on with your life. If it is done incorrectly, you could have a financial disaster and pay much more than lawyer fees.
- If you had joint accounts with your husband, contact each credit bureau to make sure that your credit file is now in your own name. Verify that it lists all joint accounts. If the credit information was only in your husband's name, ask the credit bureau to add that information to your file.
- Before divorcing, list all joint accounts, such as mortgage, home equity loans and credit cards. Notify your creditors of your decision to divorce and reopen the accounts in only one spouse's name. This will also help each spouse establish individual credit records. If both of your names are on an account, you can become legally responsible for the debt if your husband doesn't pay, even if the divorce decree states that your husband will assume the responsibility of the debt.
- If you have a joint credit card, pay it off and close the account. This guarantees that neither spouse is responsible for the other's bills and your credit report will not be affected by future actions of your ex-husband.
Bill Hardekopf is CEO of LowCards.com, a free, independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards/rebates, balance transfers and lowest introductory rates. It gives an unbiased ranking and review for each card, making it easy for consumers to compare credit card offers and apply securely online.
Take the Next Step:
- Need to apply for a new credit card? Make an informed decision. Visit LowCards.com to research current offerings.
- In the process of separating? Divorce360.com offers additional advice on protecting your credit in Protect Your Credit in Divorce.
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