After 10 years in the financial industry I recently found out a simple yet startling fact. When you are the secondary person on a loan, credit card, or mortgage, you are NOT establishing credit. The primary person is the only one whose credit is being affected. Well, so what you say? Who cares? Well I do, for starters. I care when I sit down with individuals who are in there fifties and they have no credit history, because their spouse was primary on all credit deals. By the time I see them a separation has taken place or they are in the final throws of an ugly divorce and they hope to obtain financing for a mortgage. Well guess what, no one besides the scary guy who hangs out at the back of alley will give you a mortgage. Unlike a financial institution, Mr. I Will Break Your Legs does not care if you do not have a beacon score, he does not mind if someone else took charge of all the finances for you, in fact he loves it. You are a sucker in his eyes, and unfortunately you will get burned.
In the past few months, I cannot count the number of men and women who have sat in front of me, with distraught faces. To realize at this life stage, you are unable to obtain a loan because you lack a sufficient credit history, is stressing, but let us take it one step further. Many of these same individuals did not pay any of the household bills, in fact all the bills were set up in the name of their spouse. The cable, phone and hydro companies do not recognize these individuals.For lack of a better phrase, you do not exist. For some, this is a blessing. But when your life suddenly takes a sharp turn to the left, and you are now responsible for your own finances, the joy from being off the grid quickly diminishes.
My advice is to be involved in all aspects of your finances. Know how much money comes in, where it goes, and what is being paid. If you own a credit card, are you the primary or secondary person. If you are the secondary, apply for a credit card in your name only. If you are afraid to use it, then follow these steps.
Treat yourself well, yet stay on the path of responsibility. You will soon find that your credit begins to establish, while your beacon score rises. If you are unsure of what your credit looks like, please contact either Equifax or TransUnion for your free credit report. Of course, if you are totally impatient (like me) you could pay the fee, and receive it online.
Please let me know your thoughts and questions. If this topic interests you, I will take a closer look at how not owning your finances will harm you.