Buying your first home can be an exciting time for a new couple. But those hopes can be dashed when your spouse’s poor credit comes roaring out of no where, according to Freedom Debt Relief.
All is not lost but it will take some planning to increase your spouse’s credit score.
After all, this is not just your house, it’s also for your spouse. You’re buying the home jointly. But how do you buy a home jointly when your spouse’s poor credit will get an immediate denial on the mortgage?
Quick Fixes With Credit Report Errors
Getting a copy of your spouse’s credit report and going through it might yield some low hanging fruit. If you find any errors, report them to the credit bureau where you got the report. They might ask for some documentation to back up your claim.
Depending on the severity of the error, it can mean a double digit boost in your credit score.
Keep An Eye On Credit Utilization
There’s a general guideline in the personal finance community that no more than 30% of any credit card limit should be utilized. This is definitely not a hard and fast number. It can vary. But the general consensus based on anecdotal evidence seems to settle on 30%.
What exactly does 30% credit card utilization mean? If your credit card limit is $1000, you don’t want to have a balance of more than $300 (300/1000 = 30%).
The 30% rule also comes into play with overall credit card utilization. If you have three credit cards with a $1000 balance each, that’s a total of $3000 of credit. Note this is different from available credit. That will depend on the balance each card is carrying.
If each of those three credit cards has a balance of $300 for a total of $900, you are still only utilizing 30% of your total credit cards’ limit. If the balances are instead $0, $100, $800, that is still $900 and 30% utilization.
However, if you have balances of $200, $300, and $600, that’s a total of $1100, or 1100/3000 = 36.7% utilization. This pushes you over the 30% rule and will likely have a negative effect on your credit.
If You Have No Credit History, Build One
Your spouse might not yet have a credit history, in which case their credit score can be low. Their score can be increased by building their credit history. Within only one year, you can see some great results. Below are a few ways to build credit history from scratch.
Use Secured Credit Cards: A secured credit card is not the same as a common credit card. Secured cards require a deposit to use. But almost anyone can open an account. The benefit for building a credit history is that payments are reported to credit bureaus.
Add Your Spouse To Your Credit Card: You can add your spouse as an authorized user to your credit card. Be sure the credit card company will report her payments to credit bureaus, which will help in building your spouse’s credit history.
Debt can seem like a pesky gnat in the beginning. But before you know it, it’s grown into a oversized animal that you can no longer control. Freedom Debt Relief can help get your debt back down to a manageable level.