Monday, July 17, 2006

CoBorrowers: Getting Credited!

Co Borrower Strategy to Build FICO Scores

Are you always listed as the second qualifying party on loans and credit cards and your spouse as the Borrower? Banks consider the 'primary wage earner' in 1st position for repayment resonsibility due to the income imbalance in most households. In some cases, the spouse is not reported to the credit atencies. You may need credit separately from your spouse.

Now, many of us know the Co Borrower is often the one at home paying the bills--so if anything we would like to credit you for making your beloved Borrower look good. However, the FICO system has ways of noting which person is the primary applicant or joint user of an account. Legally the banking industry does not discriminate on race, sex, age, etc. Below are a few pointers on enhancing your FICO score and building your credit:

Buy a Car in Your Name Even if you will both drive a car, and the money may come from a joint taking out the loan in your name you are building your own credit---seperately. Needless to say your payment history will be impeccable.

Get a Personal Credit CardInstead of using a debit card for everyday items, take out a modest credit card from the same bank and use it to buy groceries, etc. By setting up an auto pay account (from your bank account) you will never miss a payment. HINT: always leave a small amount in your monthly balance...$5 will keep it 'active'. If you pay off your credit cards in full every month it looks like you aren't using keep that balance below 30% of the limit and your FICO score will be great.

Keep Cellphones and Utility Accounts in Your NameThese regular accounts are good references if you need to create alternative credit. Again, set up an auto pay system to make sure you reap the benefits of consistent payment history.

Take out a Second Mortgage in Your Name
Even if you share the 1st mortgage with your spouse, when you take out a second in your name (assuming you can afford this) it will create a very important additional mortgage record in the system for you as the Borrower, not Co-Borrower. If you get a Home Equity Line, ...just keep it open with a small balance. If you and your spouse or partner operate a business, be sure to list yourself as President or Vice President.  If you already have a 1st and Second, you may still qualify for a third lien or line of credit.

Separate Retirement Accounts
It is also highly likely that you will need to provide for your own retirement income. Having your own funds is noted when you apply for a mortgage. Since women live on average about 10 years longer than men (sorry guys!) it is especially important that you have ready access to funds without the hassle of proving your ownership in your golden years should your spouse loose his or her marbles. Consider savings bonds if you aren't game to play the market...or invest in something you understand like antiquest that may increase in value

Build Your Own Asset Portfolio
A good financial advisor can help you set up an investment account to manage your assets given your situation. The rule: Pay Yourself First! Not Uncle Sam, not your kids, and certainly not your darling primary wage earner. If you start a modest nest egg sooner than later... it will bear fruit long into your golden years. And with that great FICO you will be able to borrow money on your own terms!

Two great books on thissubject are: Smart Women Finish Rich and the sequel: Smart Couples Finish Rich, by David Bach. In these slim volumes are many useful strategies for building your financial muscles, and while your'e at it--your credit rating.

Happy credit building!

© 2007 susan templeton