While the number of working couples in the US continues to rise, there are still many stay-at-home moms. Unfortunately, the Federal Reserve doesn’t believe they should have a credit card. In fact, in 2012, the Fed explained that the credit card companies must consider the income of an individual and not that of a household in qualifying applicants under the CARD (Credit Card Accountability Responsibility and Disclosure) Act of 2009. The philosophy behind this was that it would keep college kids from gaining access to credit and then digging themselves into a big hole of debt before they graduated. However, there were unintended consequences. It was that it shut out stay-at-home parents from obtaining a credit card on their own.
A stink arose
This resulted in a huge stink in the blogosphere with many charges of “inequality.” This caused stay-at-home moms and dads to get worried and rightly so as this new rule would change the ability for them to get credit in their names and to create good credit histories. Among these issues though, there were many fallacies that popped up regarding marriage, credit and debt. Here are the four most frequent myths about stay-at-home parents and the real story on these misconceptions.
You will never be able to get a credit card
You can get a credit card as a stay-at-home parent if you and your spouse together apply for the card or if you’re made an authorized user on an account that already exists. However, it will be tough for a stay-at-home parent to get a card on his or her own. The ruling from the Federal Reserve doesn’t specifically say the amount of income you must have to get a credit card. But it does say that the company that issues the card must confirm the fact that you could make payments. This means if you earn a little money through freelance consulting work or a small home business this could be enough for you to get a credit card. The only good news is that this Federal Reserve rule isn’t retroactive so that if you already have credit cards in your name, you won’t lose them.
I won’t be able to build credit
While a credit card would help you build credit, but so do other types of loans. This means that having a credit card isn’t crucial for building credit if you’re a stay-at-home parent. If you pay your student loans, an auto loan or make your mortgage payments on time, this will increase your credit score – assuming your name is on the loan – either as an individual or a cosigner. It’s also possible to build a credit history by being a joint account holder or the authorized user on credit cards.
We share all our debts
This rule for getting a credit card may seem really unfair but there is a brighter side. You don’t also share any debt the household takes on. Despite the fact that the two of you agreed to assume responsibility for all debts together, that’s not the way your lenders will see it. The person who will be responsible for any credit card debt is the person who signed up for it. This means that the credit card company can only go after the person who signed up for the card for payments. You as the spouse won’t be bothered about paying. In fact, this goes for any type of debt you took on before you were married including student loans. However, there is one big exception to this. There are nine community property law states. If you live in one of them and your spouse signs up for a loan or credit card and the both of you benefit from it, then the two of you share the obligation to pay it back.
We have the same credit histories
May people assume that when they get married their credit histories are merged. This is not true. They remain separate although if you sign up for new debt together or create joint accounts, your two reports may show some of the same information. The fact is your spouse’s credit does affect you if you’re a stay-at-home dad or mom and rely on income from your spouse. If one person’s credit is not so good then your household will end up paying higher interest rates on credit cards and loans. Your better credit report will help only if you sign up together. In the event that you both can show income, the spouse that has the better credit rating can take out the credit cards and loans for the two of you – assuming that person’s income is enough to qualify. However, when it comes to getting a mortgage, you may need to use both of your incomes. And this is a case where if your spouse has bad credit it can hurt you.
The best strategy
The best strategy is to work on any credit issues in a relationship early on. This may be an odd thing to do in a serious relationship but it pays to be prepared. At some point you might say, “let’s just stay in tonight and look at our credit reports.” If you don’t know where to get them, you can obtain them from the three credit bureaus – Experian, Equifax, and TransUnion – or on the site www.annualcreditreport.com. This site offers the advantage of being able to get your credit reports one at a time or simultaneously. Many people choose to get them individually at four-month intervals as this gives them a sort of “poor man’s” way to monitor their credit year-round.
Get your credit scores, too
The two of you should also get your credit scores – either from one of the three credit bureaus or an independent source such as CreditKarma.com. The following video explains about credit scores and what you need to do to have a good one.
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