DO-IT-YOURSELF CREDIT REPAIR PRIMER

Women and Credit

To avoid credit problems, it is imperative that all women educate themselves about credit and money management and establish and maintain their own credit, separate from their husbands. This means that single women with an established credit history should maintain their separate credit identity if they decide to marry. Similarly, already married women who share their husbands' credit should build a credit file in their own names with as few ties as possible to their husbands' credit.

Women often have difficulty developing their own credit histories, and have some of the special credit-related issues commonly faced by women and talk about how best to deal with those issues.

Opportunity Act

When building your own credit, it is important to know about the federal Equal Credit Opportunity Act (ECOA). Enacted in 1974, the ECOA was written to help ensure that among other things women are not denied access to credit simply because of their Women Have Problems with Credit.

Women Have Problems with Credit

Without a credit identity of their own, women who experience marital status changes are likely to have problems with credit. Credit-related problems tend to be the result of a number of factors including:

· The role women traditionally played in the American economy, their tendency to take their husbands' names and their reliance on their husbands to handle money matters, such as credit applications, loans, etc.

· The general lack of knowledge regarding credit reporting and how credit information is reported to credit bureaus.

· A lack of understanding on the part of both men and women regarding the importance of a woman having a credit history completely separate from that of her husband.

In the past, most women did not work outside the home, and consumer credit was acquired and maintained in the name of a womans husband rather than in her name or in both of their names. Although many women helped manage their household's finances-and in some cases even helped pay for their family's use of credit-most never developed their own credit identities. These women were financial nonentities in the eyes of creditors and the credit reporting industry.

Today, increasing numbers of women have moved into the workplace, and two income households are the norm rather than the exception. Also, the federal Equal Credit Opportunity Act, explained in detail later, now makes it easier for women to obtain credit.

Despite these important changes, many women, like consumers in general, remain relatively uninformed about credit, credit bureaus and the credit reporting process. Women also tend not to understand the critical importance of having credit in their own names, and consequently, they do not.

However, in a society where many women delay marriage to establish their careers and wives tend to outlive their husbands, women cannot afford to remain financially naive and vulnerable. Women need to know how to manage their own money and credit whether they are single, married, widowed or divorced. If married, women specifically need to actively participate in the management of their family's finances and maintain or develop their own credit identities.

Women's Account User Status Designations

An important but often overlooked part of credit education is understanding the meaning of common account user status designations and why some user status designations are better for building credit than others. This knowledge is invaluable to the woman who wants to build a credit history in her own name.

Account user status designations indicate to creditors and potential creditors who can use an account and the degree to which each user is legally responsible for managing the account and making payments. Generally, the person who can use an account and the person who has payment responsibility are established at the time credit is applied for.

Many women do not understand that being listed as an authorized user on their husbands accounts does little to build their own credit identity. Nor do they understand that if all of their accounts are joint accounts-shared with their husbands-these women risk losing that credit if they become separated, divorced or widowed.

Different account designations convey different messages about a user's responsibility for an account. Therefore, various designations will be of greater or lesser help to the woman who is trying to establish her own credit identity.

The most common account user designations and their effects on a woman's credit building efforts are summarized below.

Authorized User Status. A woman who is listed as an authorized user on her husband's account has permission to use the account but has no legal responsibility for it. In other words, authorized user status indicates that a woman is relying on her spouse's earnings power to pay the account. Accounts with this status are of minimal value to women who want to establish their own credit identities.

Joint User Status. If a woman has joint user status on an account, she and her husband can both use the account-and they legally share equal responsibility for account payments. Because there is shared responsibility, joint user accounts can help women build their own credit histories. However, joint user accounts also link a woman's credit history to her husbands. This means that if a woman's husband abuses a joint credit account, the adverse account information will appear m her credit history as well as his.

Individual. If a woman's accounts are designated as individual, she has sole responsibility for payments and is the only person authorized to use the account. Women with individual accounts qualified for that credit without their husbands. Individual accounts place women in the strongest financial position if their marital status changes, since individual accounts do not link her use of credit or her ability to obtain credit to her spouse's income and credit history.

Property States

It is important for women living in a community property state to realize that they will not necessarily enjoy the benefits of separate credit and will be less able to insulate themselves from any money troubles that their husbands or former husbands may have. Community property states are:

The Commonwealth of Puerto Rico also has community property laws.

In these states, husbands and wives are viewed as economic partners, and the earnings and property of each spouse are considered to be jointly held and controlled. Therefore, a husband and wife are equally liable for one another's debt, and credit grantors may take legal action against a wife's property to collect a debt her spouse incurs and does not pay and vice versa.

When a woman applies for credit in her own name in a community property state, the creditor may ask her marital status and request information about her husband-if he is going to be contractually liable for a debt or if she is relying on his income to help make the payments. However, if half of a woman's community property and income qualifies her for the credit she's applying for, her husband does not have to cosign even though the creditor still has the right to collect information about him.

If a woman living in a community property state posts property that is jointly owned by her husband and herself as collateral, a creditor may require that her husband sign on the note on the mortgage or deed of trust even if the woman will be solely responsible for repayment. However, a woman's husband cannot be required to cosign the bank note unless he is going to be specifically obligated to help repay the debt.

Separate States

Most states are separate property states where the credit history of a woman's husband is irrelevant to her request for credit since by law she alone is responsible for making payments on any debt she incurs in her name. In these states, a husband is not required to cosign a credit application, and creditors are barred from asking about a woman's marital status.

Exceptions do apply when property is involved. When a woman wants to finance the purchase of property in her own name and she posts collateral, the creditor may require that her spouse cosign the note. (The same would hold true if the husband purchased property in his own name.) By having the spouse cosign, the creditor is ensuring that the property can be taken back and sold to recover its costs if one spouse defaults. A creditor also may require that a spouse sign a security agreement or a quit claim deed so that it can repossess the property should the owner spouse default.

For specific information about marital property rights in your state, contact the office of your state's attorney general or your state's office of consumer affairs.

Women's Individual Credit

Having good individual credit provides women several important benefits both in and out of marriage. First, if a woman's husband experiences financial difficulty and has trouble paying his bills or if he is a poor money manager and doesn't make account payments on time, her good credit will remain unblemished although his may be damaged. This would not be the case if the woman and her husband shared the accounts he was not paying on a timely basis.

Second, a woman with her own credit is better able to maximize her family's financial options and opportunities. This ability can be especially important if a woman's spouse gets into financial trouble, loses his job or becomes seriously ill and has to stop working. In such situations, a woman with her own credit will be able to provide her family with greater alternatives for dealing with difficult financial problems.

Third, as discussed earlier, women with their own credit identities will be better able to create a positive fife for themselves after separation, divorce or widowhood.

When building credit, your ultimate goal should be to obtain individual credit in your own name. Joint credit should be kept to an absolute minimum. Realistically, however, if you have little or no individual credit to start with, you initially may need to apply for joint credit with your husband as a means of building your file and then, once a good payment history is established on those accounts, use them to get individual credit. However, this approach should be pursued only if you feel absolutely confident that your husband will not abuse the credit, thereby damaging your credit history and his at the same time. Shared credit should be viewed only as a means to an end-individual credit.

Women's Credit and Money Management

There are a number of ways that women can educate themselves about money matters. This can include taking courses at a local community college or university, contacting the area Consumer Credit Counseling office to find out if they offer any courses in money management and understanding credit and reading books and magazines on these subjects.

Another educational resource is the American Association of Retired Persons (AARP) that sponsors the Women's Financial Information Program (WFIP), a seven-week program specifically designed for middle-aged and older women. WFIP teaches money management skills and helps women develop the confidence to make decisions about money matters. The WFIP is offered though local groups like YMCAs and community colleges. For more information, write AARP at 601 E St., N.W., Washington, DC 20049, or call the association at (202) 434-2277. A banker, the family's financial advisor and/or a CPA also may be able to advise women about sources of basic information about credit and money management.

A Women's Own Credit History #1

There is no simple, surefire way to develop a credit history for yourself. However, the approach outlined in this section is an excellent way to begin. It starts with the easiest-to-get forms of credit and builds to types of credit that are more difficult to obtain.

Before you begin the credit-building process, make sure that any assets owned by you and your husband are listed in both of your names. Such assets might include: property, cars, boats, stock, bank accounts, etc. These assets should be listed every time you apply for credit.

You also should request a copy of both your credit files and your husband's credit files from each of the big three credit bureaus before you begin to apply for credit. This way you will know which-if any credit reporting agencies are maintaining a credit file on you and what is in those files. When you receive the credit reports, review them carefully for accuracy. If you find any errors, correct them following the steps outlined in Chapter 4.

If you have a credit file in your own name and you need to use joint accounts to help build your history, make sure those accounts are a part of your credit record, assuming that they have a good payment history. Also, make sure that any credit you had in your maiden name or in another town is a part of your credit record. If you find that certain accounts are missing write to the credit bureau and ask that they add the information. Most will do so, although they may charge a small fee.

Once you have reviewed your credit records and those of your husband and dealt with any problems that they may contain, it is time to initiate the credit-building process. If you have little or no credit, the best approach is to obtain a small cash-secured loan from your bank. This is an important first step. If your marital situation changes and you need to borrow money, you will already have a positive relationship established with a lender.

Schedule an appointment with a loan officer, and explain what you want to accomplish. If the first bank you talk with is unwilling to work with you, go to another bank. When you find a bank that is willing to work with you, open a checking account or a savings account in your own name at that bank.

The bank you are working with will make you either an unsecured or a secured loan. It may ask that you secure the loan with an asset, or it may want to make a cash-secured loan. If it makes you a cash-secured loan, the bank will probably ask that you put the loan proceeds in a certificate of deposit at the bank. In other words, you will not have the use of the loan money. This is all right, however, since the purpose of the loan is to build a strong credit history in your own name, not to purchase things. If you default on the loan, the certificate of deposit or the asset you have posted as collateral allows the bank to recover its losses.

If the bank tells you that you will need a co-signatory to get a loan, do not ask your husband to cosign. Ask a close friend or relative.

Once you have paid off your loan, request a copy of your credit record to make sure that it reflects your loan payments. If it does not, ask your loan officer to report the payment history.

Depending on your situation, you may now be ready to obtain a credit card in your own name. Or you may need to apply to your bank for a second, unsecured loan or for a loan without a co-signatory.

If you apply for a credit card, begin by applying for credit that is relatively easy to obtain. This type of credit includes retail store charge cards and oil and gas cards. Charge a small amount, and make your payments on time.

After you have demonstrated that you can manage this new credit, apply for a national bankcard. Having one can help make other forms of credit more available to you. If your own bank offers a bankcard and if its terms are competitive, apply for it.

If you are unable to obtain a national bankcard, apply for a secured bankcard. These cards are designed for people who want a bankcard but cannot qualify for an unsecured MasterCard or Visa. You may be able to use your secured bankcard as a stepping stone to an unsecured bankcard if you demonstrate that you are able to use your secured credit wisely and if you make all account payments on time.

If you are approved for a secured card, you will be required to collateralize your credit purchases by either opening a savings account with the issuing bank or purchasing a CD from it. Then if you default on your payments, the card issuer can withdraw money from your account-or cash in your CD-to pay your account balance.

When shopping for a secured bankcard, there are several factors you should consider. These factors include the amount of deposit you will be required to put up and what rate of interest you will be earning on that money; what your credit line will be as a percentage of your deposit; whether or not you can convert your secured card to an unsecured card, assuming a positive payment history; and the amount of any application or processing fees.

For an up-to-date list of banks offering secured and/or unsecured bankcards and the terms of those cards, contact Bankcard Holders of America at (800) 638-6407.

If you already have some credit in your name, or if you and your husband have some longstanding, well-performing joint credit accounts, you may shorten the credit-building process. This is especially true if you have a well-paying, relatively secure job.

If you have a credit file in your own name and you need to use joint accounts to help build your history, make sure those accounts are a part of your credit record, assuming that they have a good payment history. Also, make sure that any credit you had in your maiden name or in another town is a part of your credit record. If you find that certain accounts are missing, write to the credit bureau and ask that they add the information. Most will do so, although they may charge a small fee.

Once you have reviewed your credit records and those of your husband and dealt with any problems that they may contain, it is time to initiate the credit-building process. If you have little or no credit, the best approach is to obtain a small cash-secured loan from your bank. This is an important first step. If your marital situation changes and you need to borrow money, you will already have a positive relationship established with a lender.

Schedule an appointment with a loan officer, and explain what you want to accomplish. If the first bank you talk with is unwilling to work with you, go to another bank. When you find a bank that is willing to work with you, open a checking account or a savings account in your own name at that bank.

The bank you are working with will make you either an unsecured or a secured loan. It may ask that you secure the loan with an asset, or it may want to make a cash-secured loan. If it makes you a cash-secured loan, the bank will probably ask that you put the loan proceeds in a certificate of deposit at the bank. In other words, you will not have the use of the loan money. This is all right, however, since the purpose of the loan is to build a strong credit history in your own name, not to purchase things. If you default on the loan, the certificate of deposit or the asset you have posted as collateral allows the bank to recover its losses.

A Women's Own Credit History #2

If the bank tells you that you will need a cosignator to get a loan, do not ask your husband to cosign. Ask a close friend or relative.

Once you have paid off your loan, request a copy of your credit record to make sure that it reflects your loan payments. If it does not, ask your loan officer to report the payment history.

Depending on your situation, you may now be ready to obtain a credit card in your own name. Or you may need to apply to your bank for a second, unsecured loan or for a loan without a cosignator.

If you have a credit file in your own name and you need to use joint accounts to help build your history, make sure those accounts are a part of your credit record, assuming that they have a good payment history. Also, make sure that any credit you had in your maiden name or in another town is a part of your credit record. If you find that certain accounts are missing, write to the credit bureau and ask that they add the information. Most will do so, although they may charge a small fee.

Once you have reviewed your credit records and those of your husband and dealt with any problems that they may contain, it is time to initiate the credit-building process. If you have little or no credit, the best approach is to obtain a small cash-secured loan from your bank. This is an important first step. If your marital situation changes and you need to borrow money, you will already have a positive relationship established with a lender.

Schedule an appointment with a loan officer, and explain what you want to accomplish. If the first bank you talk with is unwilling to work with you, go to another bank. When you find a bank that is willing to work with you, open a checking account or a savings account in your own name at that bank.

The bank you are working with will make you either an unsecured or a secured loan. It may ask that you secure the loan with an asset, or it may want to make a cash-secured loan. If it makes you a cash-secured loan, the bank will probably ask that you put the loan proceeds in a certificate of deposit at the bank. In other words, you will not have the use of the loan money. This is all right, however, since the purpose of the loan is to build a strong credit history in your own name, not to purchase things. If you default on the loan, the certificate of deposit or the asset you have posted as collateral allows the bank to recover its losses.

If the bank tells you that you will need a cosignator to get a loan, do not ask your husband to cosign. Ask a close friend or relative.

Once you have paid off your loan, request a copy of your credit record to make sure that it reflects your loan payments. If it does not, ask your loan officer to report the payment history.

Depending on your situation, you may now be ready to obtain a credit card in your own name. Or you may need to apply to your bank for a second, unsecured loan or for a loan without a cosignator.

If you apply for a credit card, begin by applying for credit that is relatively easy to obtain. This type of credit includes retail store charge cards and oil and gas cards. Charge a small amount, and make your payments on time.

After you have demonstrated that you can manage this new credit, apply for a national bankcard. Having one can help make other forms of credit more available to you. If your own bank offers a bankcard and if its terms are competitive, apply for it.

Widows/Widowers

If your husband (or wife) is ill and death is on the horizon, it is important that you prepare fiscally for widowhood. This preparation includes building a credit history for yourself; correcting problems in your credit file, if you already have one established (do the same for your husband's credit file); preparing written explanations for any adverse information in your credit record that is the result of events beyond your control-your husband's financial troubles or his mismanagement of money-and talking with a trusted financial advisor.

Generally, dealing with this situation is a judgment call; there are many women who continue to use their husbands credit cards long after their spouses have died. Doing so also can cause women to delay establishing credit in their own names. This can cause women trouble later on if they wish to buy a new car, a smaller home, go back to school or do some remodeling etc. This should be a special consideration for younger widows who may still have several decades of life to live.

When you apply for credit after your husbands death (and during any credit reapplication process), potential creditors cannot discount or ignore income such as annuities, pensions, social security payments, disability payments, etc. However, they are allowed to evaluate the reliability of these payments when making their credit-granting decisions.

If at the time of your husband's death you have little or no credit history of your own, it is essential that you do what you can to build one. As you begin the credit-building process, dont forget that the ECOA says that when you apply for credit the creditor must consider information in your husbands file if you can prove that his credit history reflects yours. Although this is a long shot, it may be worth the effort depending upon your particular credit situation.

Once your husband dies, any bank accounts that you held jointly with a right of survivorship will go directly to you and will not be tied up in the probate process. The same holds true for life insurance benefits. To receive these monies, however, you will need to file a claim, and it could take as long as six weeks after filing before you actually see the money. This is another reason why it is a good idea to have your own credit and your own bank account since you may need ready and adequate access to cash and possibly credit immediately after your husband's death.

If your husband dies and leaves debt, it will depend on the type of debt whether or not you will have to pay it. Most debt you will not have to pay. However, if a debt is a shared obligation and there is not enough money in your husband's estate to pay it in full, you may have to take care of that debt using the money from the bank accounts and insurance proceeds, etc. that were not a part of the probate process. You also will be obligated to take care of any debt secured with property.

The rules governing a widows obligations for her dead husband's debts are different in community property states. Check with your attorney.

Once again, the problems described above illustrate why it is important to keep joint credit to an absolute minimum and to avoid it completely if possible. Having at least some individual credit will maximize the number of options you will have for dealing with money matters after your husband's death.

If widowhood happens suddenly and you have not been able to prepare yourself credit-wise, you will face a number of financial obstacles that may impede your ability to build a happy and satisfying fife for yourself on your own. Without a credit history of your own, you may find yourself without access to ready credit. Also, if you were an authorized user on your husbands accounts, those accounts can be canceled by his creditors. In addition, a creditor has the right to request that you reapply for credit on joint accounts if an account was based on your spouse's income. If a joint account was based on your income, however, or if either of you could have qualified for the credit at the time of application, you will probably not be required to reapply.

To postpone dealing with a loss of credit right away, you often can delay reporting your husband's death to his creditors. Use this time to get your financial situation in order. It is not always advisable to delay reporting your husband's death for an extended period of time. In some instances, if the creditors somehow learn about your husband's death before you have told them, the information may prejudice them in the reapplication process.