How stay-at-home spouses can build credit

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

Also, maintaining some money independence can keep both of you on the same level in your relationship.

“Household financial dependence on a single income earner can foster unhealthy relationship control dynamics,” said Catherine Fox, a certified financial planner, founder and consultant at Sunnybranch Wealth in Portland, Oregon, in an email. “Stay-at-home spouses who take steps to protect their credit scores and financial literacy are doing their part to maintain healthy financial attitudes and dynamics in their relationship.”

Whenever you and your spouse apply for a joint loan, such as a mortgage, both of your credit scores are evaluated by the lender. Lenders may use a person’s score that falls on the lower end to determine your eligibility. Ideally, the lowest score between the two of you is still in good standing as this can affect the terms of the loan, such as the interest rate, you qualify for together. A low credit score can make borrowing money more expensive.

Your credit score also comes into play when you apply for a credit card in your own name, which you can do even if you have no income. As long as you are 21 or older, you can include your spouse’s income on the card application.

Moreover, being single again unexpectedly is one of the most difficult reasons non-working spouses need to build their credit.

“Having a solid foundation will help if you’re single and need capital to get started,” says Brittany Davis, a certified financial advisor based in Memphis, Tennessee, who is an associate financial planner for Brunch & Budget, a registered investment advisor. “I know some people are pessimistic about credit and debt, but there are many things that credit can be used for.”

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

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

You can be an authorized user on your spouse’s credit card. They will be responsible for making the payments, but if they pay on time each month and you both avoid charging more than 30% of the credit limit, it can build your credit score over time. Applying for a loan under both of your names, such as an auto loan or mortgage, can also be helpful because on-time payments will be reflected on both of your credit reports.

“Very rarely, stay-at-home spouses should be joint account holders or have their spouse’s credit card added to them to help them build and maintain their own credit score,” says Fox.

Also ensure timely payment of utility bills and other household bills including rent payments. In some cases, it is also reported to the credit bureaus.

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

As a credit card authorized user, you are at the mercy of the behavior of the primary cardholder. If your spouse makes late payments, it can negatively affect your credit. You’ll want to set a budget with each other, because when more than one person uses the same card, it’s very easy to overspend. 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 you were married, but you are responsible for each other’s debts after the marriage. But in non-community property states, you only share joint responsibility for accounts and debts.

And if you are the income earner, proceed with caution before co-signing a loan for your non-working spouse or other loved one. It is not like a joint loan, where both parties share the burden of paying the debt but may also share ownership of the assets.

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