After maxing out several credit cards in her 20s, Stephanie Shalit spent the next decade wiping out her debt and swearing off plastic. “I was single into my late 30s, making $125 per hour as a yoga teacher and just paying for everything in cash,” she says. In general, negative information—like high debt, late payments, foreclosures, and collections—stays on your credit report only for seven years, so those early mistakes have long since been wiped off Stephanie’s record. But avoiding credit altogether hadn’t cleaned up her credit score. In fact, it wasn’t until she met her future husband that Stephanie realized her cash-only lifestyle carried consequences. “We went to open a joint account, and my husband learned I had no credit score,” she says.
The Problem: Without a credit history, Stephanie could have been financially vulnerable if something happened to her husband (they have since worked out payment settlements with the companies that eliminated those risks). “Plus, even if you don’t want to borrow money, a nonexistent or low credit score can affect the price of mobile phone plans, car insurance premiums, and more,” says Weston.
The Fix: One in 10 Americans is “credit invisible,” meaning they don’t have enough credit history to generate a score with each of the three main credit-tracking bureaus, according to the Consumer Financial Protection Bureau.
Stephanie may be able to improve her credit score by having her husband add her as an authorized user to some of his credit cards, says Weston. Most card issuers will then export the spouse’s good history with those cards into your credit files. “That can solve the issue almost overnight if the other person’s credit history is imported into your credit report,” she says. If you’d rather not go the authorized user route, consider a secured credit card. These require a cash security deposit (which typically starts at $200 or $300), so they’re less risky for the issuer and easier to have approved.
To keep the card active without being tempted to charge more than you can afford, designate that card for a recurring monthly bill, like cable or Internet. Then head to the credit card website to set up automatic payments so the balance is paid in full each month. “Just having a credit card won’t put you in debt,” says credit expert Ulzheimer. “It’s all about how you use it.
Source: on 2018-02-19 15:26:15
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