Tips for Women on Building Their Credit Score

Tips for Women on Building Their Credit Score

July 20, 2018         Written By Sarah Hefner

Women are doing an incredible job of managing their personal and business lives. But one area that most of us need to better manage is our personal finances. The Labor Department estimates nearly 90 percent of women will manage their own finances at some point during their lives.

One of the key things for a woman to know is the importance of her credit score. Since this directly affects her financial future and the interest rate she will pay for any loan, women of all ages and stages must understand and take positive steps to build their credit score.

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Whether a woman is single, married, or divorced, building a credit score starts with establishing credit in her own name.

If you have never had credit, or if the credit you use is listed in your husband’s or parent’s name, a woman should immediately start building credit in her name. Your goal should be a FICO score of 760 or higher. You will then qualify for the lowest interest rates on future loans like a home loan, auto loan or credit card.

Here are tips for women on building your credit score at each stage of life:

1. Single or Just Starting Out

–Start with opening a checking or savings account. This shows you can handle money in a responsible manner.

–Apply for a credit card that is in your name only. The easiest time to do this is while you are in college and you may be able to qualify for a student credit card.

If you wait until after college, it may be more difficult to get a traditional credit card with a low rate. If you are not accepted with the first or second application, apply for a secured card or a credit card from a department store or other retailer. These cards are usually easier to get than credit cards issued by banks, and they will help you build a credit history. However, these cards have higher interest rates and lower credit limits. If you get a secured card, make sure the card reports your credit activity to the credit bureaus.

–Build a good payment history. Make your payments on time for all your bills. If possible, pay off your entire credit card balance every month and always before the due date.

–Keep your debt-to-credit limit ratio low. Add up all of your credit card debt and divide it by the credit limits on all your cards. Keep your ratio under 30%. The lower your ratio, the better off you will be.

–Choose your loans and lenders like friends you want to keep. Longevity and history are important factors on your credit score. Be selective about the credit card accounts you open, and keep them open, even if you do not carry a balance and rarely use the credit card.

2. Married

According to the FTC, there are two common reasons women do not have credit histories in their own names: (1) they lost their credit histories when they married and changed their name; and (2) creditors reported the accounts shared by married couples in the husband’s name only.

–Stay involved with all financial decisions; do not leave this to your husband. Keep up with bank accounts, retirement accounts, insurance, etc. If your spouse has difficulty managing money or makes bad financial decisions, you will also be responsible for the consequences. Being uninformed about your finances could also put you in a very difficult position if the marriage ends.

–After you get married, notify all creditors of your name change. If you have used credit with a different name or in a different location, make sure the credit bureau correctly and accurately transfers this information to your credit report.

–When you order utilities or apply for a mortgage, loan, or credit card, make sure it is set up as a joint account. The creditor will report the account activity to credit bureaus in both names. If you put everything into your husband’s name, your own account will go inactive, dropping your credit score.

–Even after you marry, keep your own credit identity. Have your own credit card so your activity will help build your own credit score. It is a good idea to have your own checking or savings account as well. Have your own retirement savings account through your company or an IRA.

3. Divorced

You are not just separating your lives, but your finances as well. If you do this correctly, you can avoid a financial mess and go on with your life. If it is done incorrectly, you could have a financial disaster and pay much more than lawyer fees.

–If you had joint accounts with your husband, contact each credit bureau to make sure your credit file is now in your own name. Verify that it lists all joint accounts. If the credit information was only in your husband’s name, ask the credit bureau to add that information to your file.

–Before divorcing, list all joint accounts, such as mortgage, home equity loans and credit cards. Notify your creditors of your decision to divorce and reopen the accounts in only one spouse’s name. This will also help each spouse establish individual credit records. If both of your names are on an account, you can become legally responsible for the debt if your husband doesn’t pay, even if the divorce decree states your husband will assume the responsibility of the debt.

–If you have a joint credit card, pay it off and close the account. This guarantees that neither spouse is responsible for the other’s bills, and your credit report will not be affected by future actions of your ex-husband.

What if you have no credit?
If you have never had a credit card or loan in your name, it is possible you have limited or no credit and need to build a credit history. While a credit card can help you build credit, it is difficult to obtain one with no credit, which is the catch-22.

You do have options, though. First, you can apply for a secured credit card. Make sure the issuer reports your credit activity to all three credit bureaus so you begin to build credit. With a secured credit card, you make a deposit, and the creditor will grant you a line of credit equal to or greater than your deposit. The APRs on secured cards can be low compared to unsecured cards, but as long as you pay the full balance each month, you will not have to worry about paying interest.

To make the most of your secured credit card, use it to make small purchases and pay off the balance in full each month. After a few months of this sort of responsible use, your credit score will likely begin to increase; and with continued use, you may be able to qualify for an unsecured credit card. In fact, some secured credit card issuers will automatically switch you to an unsecured credit card if you make timely payments.

What if you have bad credit?
If you have bad or fair credit, you will need to focus on rebuilding your credit. Since you have made financial errors in the past, you may have more of an uphill battle than someone with no credit, as you have to effectively undo your previous mistakes. But with responsible credit card usage over time, you can improve your credit score.

The first step is to take stock of your situation. Request a copy of your credit report (you are entitled to a free copy each year) and closely examine each entry. If there is any inaccurate information, or if you do not recognize some of the accounts listed, you can file a dispute with the credit bureau. After an investigation, they will remove any inaccurate information—usually within 60 days.

After you have verified that all of the information on your credit report is correct, it is time to take steps to improve your score. Here is a new tool on the market that may help to improve your credit scores instantly, for free. Experian Boost™ helps by giving you extra credit for the utility and mobile phone bills you’re already paying. (Results may vary; see website for details.) To do so, you will need to know how your credit score is formulated.

The most important factor when determining your credit score is payment history. Thus, it is important to make at least the minimum payment by the due date every month. If you struggle to remember payment due dates, there are a number of tools at your disposal. First, you can have your creditor automatically deduct the minimum payment every month so you will never miss a deadline. Another option is to sign-up for due date alerts through your card issuer’s website or mobile app. If done through your mobile app, the notification will appear as a banner on your cell phone, and if you sign up through the website, you can opt to receive a text or email reminder.

If you are struggling to make your payments, it may be time to call your bank and explain your situation. Credit card issuers offer a number of programs for those experiencing financial hardship. Some will offer a lower interest rate, while others will allow you to miss a few payments without accruing late fees or negative marks on your credit report. Taking a proactive approach with your creditors can help stop things from spiraling out of control.

In addition to making payments on time, you will need to work to lower your debt-to-credit ratio if you are using more than 30% of your available credit, as credit utilization is the second-most important factor in a credit score. If you have $10,000 in available credit, for example, you want to carry a balance less than $3,000. The first step is to track your spending each month to see where your income is going. Doing so will help determine areas where you can cut spending. Perhaps you can start making coffee at home instead of going to Starbucks every morning, or you can get a less expensive cable package.

Once you have extra money to devote to your debt, create a repayment plan. If you have several credit cards, make only the minimum payments on every card except for the one with the highest interest rate. Once that card is paid off, move to the one with the second highest interest rate, and so on.

Another option to lowering your debt-to-credit ratio is opening a balance transfer card with a low or 0% interest rate. However, you will want to first determine whether the balance transfer will save you money in the long run.

If you make payments on time each month and pay down your debt, you should see your score begin to increase within a year.

The information contained within this article was accurate as of July 20, 2018. For up-to-date information on any of the terms, cards or offers mentioned above, visit the issuer's website. Many of the offers on this article are from our affiliate partners, and LowCards.com may be compensated if you take action with any of our affiliate partners.

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About Sarah Hefner

Sarah Hefner has written for several publications as well as serving as an editor to various writers. She graduated from the School of Communications & Journalism at Auburn University with a Bachelor of Arts degree in Public Relations.