Life Events and Credit

• ­ Why don’t I have a credit score?
  Credit scoring models cannot generate scores without sufficient credit information. If you have little or no credit history, credit scores probably cannot be calculated. If you have never had a credit account, try applying for a retail, gas or secured credit card to begin your credit history. If you keep your outstanding debt low and pay your bills on time, before long you may receive additional offers for credit. However, you may want to be cautious and apply only for credit that you really need.

  
  
• ­ Do credit reporting agencies decide whether I should get credit?
  No. Only credit grantors make lending decisions. A credit reporting agency’s business is credit reporting. It collects information from credit grantors such as banks, savings and loans, credit unions, finance companies and retailers. It stores this information in a computer database and then provides it to credit grantors when you apply for a new credit card or loan.

  Each credit grantor decides what standards you must meet to be granted credit. The credit reporting agency does not track the decision a credit grantor makes after ordering a credit report, whether it is favorable or not.

  
  
• ­ How are credit-granting decisions made?
  Potential creditors review credit applications primarily in relation to risk. They try to predict whether you'll repay your debts on time by evaluating your character, capacity and collateral/capital.

  • Character: Your length of residency and employment help credit grantors develop a feeling of your personal stability. They get this information from your credit application. Lenders evaluate your financial character by reviewing your existing credit relationships, such as credit cards, bank loans and mortgages. This information comes primarily from your credit report.
  • Capacity: Your living expenses, open credit limits, current debts and other payments give lenders a sense of how much debt you can realistically pay given your income. Lenders look at your living expenses, current debts and the additional payments that the proposed new obligation would require. This information comes from your credit application and credit report.
  • Collateral/Capital: Whether the loan is secured by a down payment or an asset and how much the down payment or asset is worth help lenders determine the terms of the credit or loan they extend to you.

  
  
• ­ Does renting or leasing a home affect credit scores in any way?
  The presence of a real-estate loan that always has been paid on time shows lenders that you have established a strong credit base and reflects positively on your credit responsibility. The lack of a real-estate loan on your credit report does not decrease credit scores. However, it generally means that credit scores are not as high as they could be.

  
  
• ­ Why does student loan information appear more than once on the credit report?
  Student loans are reported individually by enrollment periods. Therefore, the loans cannot be combined and appear as separate entries on a credit report.

  
  
• ­ If my spouse had bad credit before we were married, will that affect my credit score?
  If you hold a joint credit account, have cosigned a loan or have authorized use of another person’s credit, these items could affect a score if they appear on your credit report. It’s important that joint account holders or authorized users understand that their credit behavior does affect the other joint account holder or main account holder.

  A credit account held solely in the name of your spouse, child or any other family member cannot impact your credit score. However, in community-property states, all debt acquired during a marriage is considered a joint debt, regardless if the account is joint or in the name of an individual spouse.

  
  
• ­ How does divorce affect a person’s credit?
  When you obtained credit, you and your spouse signed a contract agreeing to pay your bills. A divorce decree doesn’t change that contract. When you divorce, each of you remains fully liable for your debts. There are several ways to prevent credit obligations from making divorce more difficult and to re-establish your own distinct credit lines after divorce occurs. You may wish to consider the following:

  • Communicate with your ex-spouse. Make as clean a financial cut as possible.
  • Communicate with your creditors. Decide which credit belongs to whom, then ask each company and bank that extended you credit to transfer the debt to the name of the person who will be responsible.
  • During divorce negotiations, keep your joint bills current, even if you ultimately will have no responsibility for the debt. If you don’t, your creditors could become more reluctant to release one party from joint liability.
  • Ask the credit grantor to remove your spouse’s name as an authorized user or close the joint account to additional charges.
  • If your spouse runs up large amounts of debt, you should cancel as many of the accounts as possible. Inform all creditors, in writing, that you are not responsible for these debts. This may not prevent them from trying to collect, but it does show that you attempted to act responsibly.
  • Upon your divorce settlement, you and your ex-spouse might consider obtaining individual consolidation loans to cover your share of the joint bills. Pay off the joint bills with your individual loans and close all joint accounts. This helps ensure you'll be responsible only for those bills you agreed to pay. It also will help you establish or re-establish credit in your own name.

  
  

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