DebtFreeGuru.com's - Tip of the Week - Monday, November 8, 2004
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John -- Thanks so much!!! My husband and I attended one of your workshops at the end of last year and you were able to communicate to us what we'd been missing regarding credit cards. Thanks to your information and our implementation of that data, we have cleared $56,000 in credit card debt in 2004. Amazing seminar. Thanks again! Pat
*****
When
good credit marries into bad
Sometimes
when opposites attract, it's a bad thing. If you keep your finances
separate, you'll be untarnished. But signing the dotted line together
could hurt.
By
Kimberly Lankford, Kiplinger (As seen on MSN.Com)
If I have really good credit
and the person I am marrying has bad credit, how does that affect me and
my credit?
Each person has his own separate
credit report, so you don't have to worry about your spouse's bad credit
affecting your record the minute you get married. As long as you apply for
a loan on your own, the lender can't check your spouse's report, too.
But your spouse's bad credit
could bring you down if you sign for a loan together. Consider keeping
your credit cards separate and taking out any loans in your name alone.
That might be tough to do, however, for big loans -- such as a home
mortgage -- where it may help to report both incomes. In that case, weigh
the merits of taking out the loan on just your income (if possible) vs.
including both incomes.
In some cases, an even better
option may be to wait before taking out a big loan. That would give you
and your future spouse time to improve your credit records and save for a
larger down payment, which often prompts lenders to be more lenient.
Even if you don't have plans to
borrow much money anytime soon, encourage your fiancιe to start improving
his or her credit record now. That may be an incredibly awkward
discussion, but it will pay off over the long run.
How to clean up your score
Pay your bills on time. Your
payment history accounts for 35% of your total credit score, according to
Fair Isaac, the company that compiles the scores that most lenders use.
Another 30% of your score is based on how much you owe. Owing some money
is fine, but if your balances are too large, lenders worry that you're
overextended and won't be able to repay them.
About 15% of your score is based
on how long you've had a credit history; the longer, the better. Avoid
closing a lot of old accounts or opening several new ones, because that
will lower the average age of your accounts. New credit makes up 10% of
your score; lenders worry that you'll borrow too much money if you've
recently opened a number of new accounts.
Finally, 10% of your score is
based on your mix of credit cards, mortgages, installment loans and other
debts. Lenders are most interested in your history of managing credit card
debt.
Your credit score is based on
information in your credit report, so it also helps to contact the three
credit bureaus to make sure your reports are free of errors that could
lower your score.
DebtFreeGuru.com - Tip of the Week - Monday, November 8, 2004
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