How stay-at-home spouses can build credit

This can benefit both of you as you navigate financial decisions together. But if you divorce or your spouse dies, good or excellent credit can help you as you begin to make financial decisions on your own.

Additionally, maintaining some financial independence can keep you on the same level in your relationship.

“A household’s financial dependence on a single payee can foster an unhealthy dynamic of controlling relationships,” Katherine Fox, a certified financial planner, founder and advisor at Sunnybranch Wealth in Portland, Oregon, said by email. “Stay-at-home spouses who take steps to protect their credit scores and financial literacy play a part in maintaining a healthy attitude toward money and momentum in their relationship.”

Whenever you and your spouse apply for a joint loan, such as a mortgage, the lender will evaluate both of your credit scores. Lenders may use a person’s score that falls below the threshold to determine your eligibility. Ideally, even the lowest score between the two of you is still in good standing, as this can affect what loan terms, such as interest rates, you would qualify for together. A lower credit score can make borrowing money more expensive.

Your credit score also comes into play when you apply for a credit card in your name, which you can do even if you’re not earning. If you are 21 or older, you can include your spouse’s income on your card application.

In addition, the unexpected re-independence is the most difficult reason why non-working spouses need to build their credit.

“Having a solid foundation will help you if you end up going it alone and need capital to get started,” says Brittany Davis, a Memphis, Tenn.-based CFA who is an associate financial planner for Brunch & Budget, a registered investment advisor. “I know some people are worried about credit and debt, but there are so many things that credit can be used for.”

Davis likens access to credit to insurance — it’s something that’s good to have, whether you need it right now or not.

In addition to applying for your own credit card using your spouse’s income on your application, there are other ways to build credit.

You can become an authorized user of your spouse’s credit card. They would be responsible for making the payments, but if they pay on time each month and you both avoid charging more than 30% of your credit limit, it can boost your credit score over time. Applying for loans in both of your names, such as a car loan or mortgage, can also be helpful because timely payments will show up on both of your credit reports.

“At the very least, stay-at-home spouses should hold a joint account or add to their partner’s credit card to help them build and maintain their own credit scores,” says Fox.

Don’t forget to pay other household bills on time, including utility bills and rent payments. In some cases, these are also reported to credit bureaus.

Although you each have your own credit score, your money habits can help or hurt each other, especially if you have joint loans or share credit cards.

As an authorized credit card user, you are at the mercy of the primary cardholder’s behavior. If your spouse is late with payments, it can negatively affect your credit. You’ll want to set a budget with each other because it’s much easier to spend money when more than one person is using the same card. Becoming an authorized user is an exercise in trust and communication.

Where you live can also be a factor in how you can influence each other. According to Fox, in community property states, you are generally not responsible for any debts your spouse incurred before the marriage, but you are responsible for the other’s debts after the marriage. But in non-Commonwealth states, you only share responsibility for joint bills and debts.

And if you are the beneficiary, proceed with caution before co-signing a loan for your non-working spouse or other loved one. It’s not like a joint loan, where both parties share the burden of repaying the debt, but can also share ownership of the asset.

“Co-signing is more of a risk in my eyes because you don’t have a secured interest in the item you’re co-signing on,” Davis says. “If that person defaults on the payments, you become responsible for the loan, but you have no interest as the owner.”