If you have bad credit, and you share credit accounts with your spouse, you could be hurting their credit.

A reader, J., had this question

My credit score is significantly lower than my wife’s (medical bills). She put me on as a card holder on one of her credit cards that’s in her name. Does my lower credit effect hers if I’m on her credit card account? Thanks.

J.

Thanks for your question J.

There are some specific guidelines that couples can follow in order to protect each others credit scores.

Authorized Users on a Credit Account

If the credit account is in your wife’s name, and you are an authorized user, then it can actually raise your credit score, and it will not lower hers.

As long as your wife makes her monthly payments on time, and keeps the balance on the shared account below 30% of her available credit, then this card will raise both of your credit scores.

However, if she pays late, or uses too much of the available limit, then that account can damage both of your credit scores.

Medical Bills

You are concerned about your medical bills impacting your wife’s credit. As long as her name is not on those bills anywhere, then they will never effect her credit.

Even if you were to open up an account, and add her on as a joint user, those medical bills would still not effect her credit.

Only the specific accounts (or debt) that you share with your wife matter to your credit scores. Anything that is only in one person’s name will never effect the other person’s credit.

Thanks again for your question.

What should you do if you think you’ve made a bad decision about which credit card to get?

A reader, Fred , had this question:

I have recently applied and paid for an Applied Bank secured credit card but today i found tons of online complaints on this company have i made a mistake if so what do I do?

Thanks for your question Fred.

When you app0ly for credit several things happen:

• The credit card company checks your credit score before o0ening the account – This creates what’s known as a “hard pull” on your credit report, and it slightly lowers your credit score.
• Once you get the account, the bank begins reporting your payment activities to the credit bureaus. In the case of secured cards, they usually report to all three credit bureaus (or at least two of the three credit bureaus) every month. This record of timely payment raises your credit score slightly each month that you have the account.
• Since this is a secured credit card, you do eventually get your deposit back when you close the account. However, closing the account can lower your credit score.

Why does closing a credit account lower your credit score?

When you close a credit account, it effects several parts of the formula that FICO uses to compute your credit score. The number of open accounts you have matters, as does how long your accounts have been open.

In your situation the very best thing you can do is to keep the card for a while unless you have horrible problems with them yourself.

Ever credit card company has records of bad behavior online. Every single one. No business is perfect. Banks that offer “bad credit credit cards” in general can take advantage of consumers a little more than banks that market to people with good credit.

Unfortunately, it is probably something you will have to deal with for a little while if you want to raise your credit score. You were smart to pick a secured credit card instead of a high-fee sub prime credit card. They offer much better terms.

Long story short, just make sure you keep the account open as long as you can stand to. Charge very little on the card each month (about 10% of your total available credit) and make your payments on time.

If you do this you will get the full benefit of having the card, and you will be able to move up to much better credit offers in six months to a year.

When you are ready to move on to better credit cards, make sure that you open those accounts up first, before you close this one out.

If it turns out that the company has treated you well instead of poorly, you can also ask them to convert your secured credit card to an unsecured credit card in the future.

If you do run into problems with the company, you can always close the account out. Just make sure that you open up an additional credit account before closing this one out. That’s the easiest way to manage and improve your credit score.

Thanks for your question!

Have a question for us? Leave a comment below!

This entry was posted on Monday, March 2nd, 2009 at 18:15 and is filed under Debt In Your Marriage?, Reader's FAQ. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.