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Banking Basics and Credit — Part V
In addition to setting up a budget and deciding who will pay which bills each month, you will have other banking issues to address now that you are married. The two biggest will undoubtedly be whether to join your accounts and how to maintain good credit as partners.
Joint accounts or separate?
Whether to join accounts with a new spouse is a question that countless newlyweds grapple with. There are many ways to approach the decision, with pros and cons on both sides. A joint account to cover daily bills and expenses can be easier to maintain because there is only one account to track. Be sure, however, that you and your spouse are meticulous about balancing your checkbook — it can be difficult to track the flow of cash when two people are involved in writing checks out of the same account. Many couples assign one person to manage the joint account so as to avoid this kind of confusion. This can be a good compromise as long as you both understand how your combined money is spent and you both know how to make the payments yourself.
Paying bills electronically When you are working out the kinks of paying bills, take a moment to consider the option of online banking. More and more people have taken to paying their bills online. It’s a no-fuss alternative to mailing checks out each month. Advantages include:
- Online bill payment is easy to set up — finding your payee is easy. Many banks have a ready-made list of standard payees such as electric and gas utilities and credit card companies.
- Electronic payment is certain and immediate. The check is never “lost in the mail.”
- You’ll have excellent records of the bills you have already and are planning to pay.
- Keeping track of tax information is easy. You can print out all your payments that may generate tax deductions, such as medical expenses or charity donations.
- Interest saved is interest earned. Electronic payment allows you to hold onto your money for a longer time so you can continue to earn interest on the funds. With off-line bills you must withdraw the money way ahead of time to make sure payment arrives in a timely fashion.
Credit There are two things to consider when thinking about issues related to credit. First, keep in mind that even though much of your life is linked to your new spouse, it is crucial to your financial health and viability as an individual that you maintain your own financial identity. Unfortunately, twenty-five percent of women over fifty still have credit only in their spouse’s name. In the event of death or divorce, these women are unable to open credit card accounts, apply for loans, and the like. However unlikely these things may seem, you must learn to expect the unexpected.
On the other hand, it’s important too to understand that your credit report is your partner’s credit report and your partner’s is now yours. Any surprises on this front could spell trouble when you are ready to apply for things like home and auto loans. Even the most credit conscious among us can suffer from a spouse’s financial irresponsibility. Once again, open lines of communication and honesty can help avert a potential financial disaster and keep you moving closer to your goals.
There is nothing more important to your financial viability than your credit. Essentially, your credit is based on your total debt level, timeliness in paying bills, number of credit cards, etc. If you cannot demonstrate to lenders, whether they are banks, credit card companies, or other, that you will repay your loan in a timely manner, the lenders simply will not give you a loan. It is just too high-risk for them. Issues involving credit are perhaps more prevalent for you now when facing the prospect of buying a first home or a second car, for example. In fact, realtors and home renters/sellers can use your credit report to determine a sale, so you need to be sure that yours is clean and ready to go.
Qualifying for credit What are the lenders looking for? Generally speaking, they look for character and capacity to repay (based on debt, income, and collateral) when evaluating a candidate for credit.In sum, lenders typically look at:
- Credit worthiness — You must have a good credit history.
- Financial means — You must have sufficient income to make payments.
- Debt structure — You cannot be so overloaded with debt that you are unable to make your payments. Be sure to discuss any and all of the above with your spouse so that you know where you stand, what you might qualify for, and perhaps where you two need to do a little repair.
HerTip: Do not forget to officially change your name with creditors, on accounts, and with the DMV and Social Security Administration.
Continue to: Part VI: Save and invest