Major life events affect credit
Many major life changes, such as marriage and divorce, purchasing a home, or having a child are also financial changes that involve your credit.
Marriage & Divorce
While marriage can open financial opportunities for people who are now able to pool their resources most effectively, it also involves new responsibilities and issues for personal credit.
Purchasing A Home
- Changing your name.
If you change your name--at marriage or any other time--it is important that you make sure your creditors and the credit bureaus are notified of the change. Otherwise, you might lose your credit history.
- Keep credit in your own name.
Women especially must take care to keep some credit in their own name--Judy Smith, rather than Mrs. John Smith, for example. Every year women who have never paid a bill late are denied credit because they have no credit history in their own names.
- Joint accounts mean joint responsibility.
This is true even if a divorce decree includes provisions about one of the parties paying the bills. As far as a creditor is concerned, you are both responsible for the bills, even if only one of you ran up the charges. Arrangements must be made with the creditor, either through changing the account or closing it entirely and opening a new one, if one of you is to be released from liability for the debt.
Buying a home--especially the first time--makes significant demands on personal credit. It requires a solid credit rating, and once it takes place it can dramatically change some credit dynamics. On the one hand, homeowners build equity--an asset that contributes to their net worth--with each mortgage payment. They also establish another level of credit history and stability by making their mortgage payments on time. On the other hand, a mortgage is a large loan, and may impact things like your debt-to-income ratio in the first years of the loan.
Beginning a family is another life change that puts demands on your credit. Many parents find that their credit card bills soar as they equip their homes and lifestyles to welcome and accommodate their children. But it's especially important to take good care of your credit when you take on the added responsibility of children, using it wisely and managing it well. That way you know your credit will be available when you need it--like 18 years from now when those tiny infants head off for college.
The Death of a Spouse
If you have a joint account with your spouse, by law a creditor cannot automatically close the account or change the terms because of the death of your spouse. More than likely, the creditor may ask you to update your application or reapply in your own name. The creditor will then decide whether to continue to extend you credit or change your credit limits. While your application is being reviewed, the creditor must let you use the account without new restrictions.