One typical financial mistake for women is only having credit that is shared with a spouse. It may seem to make financial sense to have credit cards that are in both your name and in your husband’s name, but there are many ways that this can hurt you in the long run.
Your credit score is one of the most important numbers in your financial life. Your credit score dictates whether you can borrow money and how much it is going to cost you to do so. Without a good credit score, getting a mortgage, a car loan or even a cell phone or utility hookup in your name is going to be much more complicated. As such, it is very important to work to develop your credit history to earn a good credit score.
The Importance of an Individual Credit Card
To understand why it is important to have your own credit card, it is important to consider the three different types of user designations assigned to a credit account:
- You may be designated as an authorized user of the account. This means that someone else (your spouse, your parents, etc.) has given you legal permission to use the account. You do not have responsibility for paying back the debts and the creditors do not consider your credit score or income in approving the credit card application. Being an authorized user on someone else’s card is not a good way to establish your own credit since you have no financial responsibility for the account, which can indicate you are relying on someone else’s income to pay the bills.
- Joint account status. When you open a joint account, the account is in both your name and someone else’s name. Both of your incomes and credit scores are used to determine eligibility for the account. This is better for your credit score, but it also links your credit with the credit of the other account user. If that person abuses the credit, or if you separate and are no longer married or wish to have joint credit, your own credit score and record can take a major hit.
- Individual account status. Individual account status is the best possible way to build your credit. When you have an individual account, you are solely responsible for applying for and paying the bills on that account. This puts sole responsibility for your credit score in your hands and protects you in case your marital status changes so you are not dependent upon the credit of your spouse in order to be able to borrow money.
If you have never had credit of your own before, you may need to start by opening a store credit card or a credit card with a very low limit. However, the time to take action and start this process is today. The sooner you get your own card and start building your own credit, the more financially secure you will be in the long run.
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