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| Preparing Your Credit for Life's Changing Needs |
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Many of life's major changes can impact your credit, but keeping these credit-savvy tips
in mind can help you keep and build your credit, so it's always available when you
need it.
Your Marriage and Future
Getting married brings many financial opportunities to couples who can combine their
resources. As you plan your wedding day, plan for your future too and take these steps
to keep your credit in tip-top shape.
- Notify creditors and credit bureaus if you change your name.
When you change your name at marriage--or any other time--it's important that you make
sure your creditors and the credit bureaus are notified of the change. Otherwise you
might lose your credit history.
- Keep credit in your name.
Women especially must take care to keep some credit in their own name.
(e.g. "Jane Smith" rather than "Mrs. James Smith"). Every year women who have never
paid a bill late are denied credit because they have no credit history in their
own name.
If either you or
your spouse-to-be has had trouble getting credit alone, try setting up a joint account to
capitalize on your shared income and/or one person's stronger history. As your joint account
history grows, you should each acquire and maintain an account of your own as well, to
establish your credit on an individual basis. As you establish individual accounts, you
might close some extra joint accounts, keeping only those you actually use.
Buying a Home
The financial rewards of owning a home are extensive. When you own your home, the
monthly payments become part of a savings plan. It does this when your home increases
in value over time, you can use the equity for other major purchases or turn it into
cash by selling it, and not have to worry about interest on the purchase. When it
comes to how much you can afford, that's for the lender to decide. The lender will
consider how much you have available for a down payment and then calculate your debt
payments, income, and credit history.
Buying a home--especially for the first time--makes significant demands on personal credit.
It requires a solid credit rating, and once it takes place it can dramatically change
some credit dynamics. On the other hand, homeowners build equity--an asset that
contributes to their net worth--with each mortgage payment. They also establish another
level of credit history and stability by making their mortgage payment on time.
On the other hand, a mortgage is a large loan, and may impact things like your
debt-to-income ratio in the first years of the loan. Make sure when applying for a
large loan you check your credit report to assure yourself that it's free of
any inaccuracies that might hinder your loan process.
Starting a Family
Beginning a family is another life change that puts demands on your finances. As many
soon-to-be parents find out, bills can quickly pile up as they prepare their homes and
lifestyles to accommodate the newborn. Nevertheless, it's more important than ever to
avoid overextending your credit when you start having children. That way you know your
credit will be available when you need it--like 18 years from now when those tiny
infants head off for college.
Divorce
If you're faced with divorce or separation, you encounter many new challenges. One is
determining how to separate your finances, including your debt and credit relationships.
Although even in good times many couples find it hard to talk about financial issues,
it is essential that you communicate about credit during the divorce. Ask yourself
these questions:
- Can we put our differences aside and talk about the financial issues of our separation?
- How can we make as clean a financial break as possible?
- Can we analyze our debts and determine between ourselves who will be responsible for what?
When couples are going through a divorce, they must remember that their joint accounts mean that
both are still responsible in paying their debts to the creditor.
- A divorce decree does not change the legal contract you and your former spouse made
with creditors. You must arrange with creditors to change responsibility.
- Keep paying bills to preserve good credit: even if it's your spouse's debt, it's still your credit rating.
The Death of a Spouse
If your spouse should die, a creditor cannot automatically close or change the terms of a joint account.
In some instances, a creditor may ask you to update your application or re-apply.
This can happen if the initial approval was based on all or part of your spouse's income
or if the creditor has reason to suspect your income is inadequate to support the credit
line.
Once you re-submit an application, the creditor can determine whether to continue to
extend you credit or to change your credit limits. While your application is being
reviewed you are still allowed to use your accounts without any new restrictions.
Within no more than 30 days of receiving the completed application the creditor must
give you a written response on your application.
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