Ensuring Your Credit for the Long Haul

How do life changes affect your credit score? As you contemplate entering a new phase in your life, plan for it as best you can in order to minimize any surprises.

Teach Your Children Well

Many credit card companies market to teenagers, and some parents welcome the opportunity for their kids to become exposed to the responsibility of buying on credit while still at home. However, these cards are usually only issued if a parent co-signs, making the parent responsible if the teenager defaults.

Rather than starting with a credit card, start earlier. Kids learn by modeling. When you make your next budget, bring your kids into that process and help them create one of their own from their allowance or income from a part-time job. Teach your children to save money at home and at the bank.

I DO Becomes WE DO

Marriage often leads to other commitments, like buying a house or starting a family. That's why married couples need to be aware of what's involved in maintaining good credit health as well as the consequences of letting that credit health slip. Here are some things you can do if you're about to tie the knot:

• Review each of your existing finances.
• Draw up a budget.
• Decide on individual vs. joint accounts.
• Notify creditors of any name changes on existing accounts.
• Verify creditors are reporting activity with joint accounts in both names.

Here are some other family-specific issues to keep in mind:

• Joint accounts

  As you consider whether to open joint accounts for credit cards, keep in mind that your approval may depend on the credit ratings of both you and your spouse. Both credit histories may also impact the interest rate and fees you are offered.

• Individual accounts

  There's a tendency for married couples to switch completely over to joint accounts. Yet, there's no rule against having both joint accounts and independent accounts. Both partners might want to consider maintaining individual accounts, in addition to any joint accounts, to ensure that you each have credit histories established in your own names, as well as jointly. Keep in mind that in community property states, both spouses can still be liable for paying off these individual accounts.

• Stick to your budget

  Preparing a budget and updating it regularly is one way for couples to avoid unpleasant surprises and keep from overextending. Refer to your budget whenever you're considering making a major purchase, applying for another credit card, or taking out a loan. Make sure your budget can handle the added expense each month. Are you starting a family or growing your family? Saving for your children's college education gets a lot of press these days, but in addition to a college fund, you also need to consider budgeting for more immediate costs such as groceries, clothing, backpacks, and music lessons!

Divorce and Its Effects

Divorce doesn't just mean dividing up your assets, it also means dividing up your debt. If you and your spouse are considering divorce, you need to seriously contemplate the implications to your credit health.

• Review your credit history

  While you're still married, request credit reports from all three of the credit reporting agencies in order to get a clear credit picture of where you stand as a couple.

• Update your budget

  Whether or not you and your partner work, a divorce will cause your financial picture to change. At a minimum, you're contemplating the need for separate households and any fees associated with initiating and finalizing the divorce settlement. If you add children to the equation, your financial picture will be more complicated. Don't leave anything to chance. Develop a budget that takes into account your projected financial future. List your projected income and compare this to your projected expenses. Unless you have a concrete reason to assume differently, assume a shared responsibility for your existing debt when you figure the budget.

Death of a Spouse

The death of a spouse is devastating. If that spouse happened to be the one who took the lead on the family's financial matters, it can be even harder. Bill paying can seem overwhelming at first, but once you have a system in place, you'll find it gets easier each month. We hope the following step-by-step tips will help you through this difficult time and protect the credit you built with your spouse:

• Open each bill when it arrives.
• Highlight the due date and what the bill is for.
• Don't hesitate to call the company directly if you're not sure what the bill is for.
• If you're paying for a recurring product or service, search through old check registers for indications that this is a bill your spouse paid regularly.
• Pay the bill so that it is in the hands of the creditor by the due date.
• If finances are tight and you are waiting on an insurance death benefit, some creditors will allow you to postpone a payment for a short time. If you need a postponement, inquire about it before the bill is due.