How to Build and Maintain Good Credit at Every Stage of Life

How to Build and Maintain Good Credit at Every Stage of Life article image.

Building and protecting a good credit score takes diligence, and there are countless life events that can affect it—such as getting married, changing jobs or retiring.

Your focus on credit might also shift as you get older: If you have kids, you might decide to help them get a jump-start on credit by adding them as an authorized user to your credit card.

But no matter where life takes you, your credit report and score will continue to have a big impact on your ability to borrow money and pursue financial goals. Here's what you need to know about credit as you age.

How to Build Credit When You're College

College, for many, is an ideal time to begin building credit. You'll have a few years of practice and credit history behind you by the time you graduate from school, when you may want to buy a car or get your own rewards credit card.

Ideally, while in college, you'll build positive payment history on an account that doesn't come with a lot of risk of accruing debt. For instance, you could consider opening a secured credit card, which typically comes with a comparatively low credit limit—say, $250 or $500. You'll need to pay a deposit usually in the same amount as your credit limit, and you'll use the card like you would a traditional card. To benefit the most from a secured card, make small charges and pay them off right away, or at least by the end of the month. That way you'll give your credit score the best shot at improving.

After a period of time of responsible use, your issuer might convert the card to an unsecured credit card, potentially with a higher credit limit. But you'll learn how to spend within a budget and pay off your purchases on time. Another credit-building option is joining another person's account as an authorized user, which lets you make charges on the account and benefit from the primary user's positive payment history. But you won't be responsible for paying the bill each month. This can be a good option if you know the primary user manages their credit card well, paying all bills on time and maintaining low balances.

How Employment Can Affect Your Credit

It's possible that a potential employer will check your credit during the application process. They must get written permission to do so, and it's most common for them to check credit when the job requires you to manage money or receive a government security clearance. Employers can't see your credit score, though they can see your payment history and the credit report factors that contribute to your score.

If you've listed work information, such as your employer's name on a previous application for credit, your employment history could show up on your credit report. This additional personal data can help lenders confirm your identity when they're considering you as a potential borrower. But your income and the length of your positions won't appear on your credit report.

Lenders will commonly request your income and calculate your debt-to-income ratio (DTI) when evaluating your credit application, so in this way your employment could indirectly affect your ability to get credit. But your credit score will not be affected simply by the type of work you do or whether you were fired from a job, for instance.

Does Marriage Have an Impact on Your Credit?

Getting married doesn't mean automatically sharing credit reports. Your past credit history will remain separate from your spouse's, and you'll maintain your own credit score. But any accounts that you decide to open jointly will appear on both credit reports.

If you cosign a student loan for your spouse, for example, you will be responsible for that debt if your spouse is unable to make the payments. The debt itself could also increase your personal DTI. A spouse's bad credit won't affect yours directly, meaning your score won't decrease merely by marrying them. But if you want to get a mortgage together, one partner's poor score could make it more difficult to qualify for a loan or get the lowest interest rates.

Changing your name after marriage won't result in a new credit report or score. But once you update your last name with the Social Security Administration, your banks and the lenders you have accounts with, the name change will be reflected on your credit reports too. Your given name will still appear on your reports, listed as a former name.

Should You Start Building Your Kid's Credit?

It's possible to help your child start building credit when they're quite young, which can give them the opportunity to enter adulthood with positive credit history. Several credit card issuers allow teens and young adults to become authorized users on their parents' credit cards, which can help responsible high school and college students learn about credit early. But consider your child's maturity level and understanding of saving and budgeting before providing them the opportunity to make purchases on a card that you'll have to pay off.

Having kids can affect your own credit, often indirectly: You may take on debt for a larger house, take out student loans for your children or pay for increasing expenses with a credit card. According to a 2019 Experian analysis, the more children a consumer had, the more debt they carried. But consumers with four or more children also had higher credit scores than those with one, two or three children, according to the analysis. Monitoring your credit closely and making payments on time can prevent periods of high debt loads from leading to poor credit.

The Impact of Divorce on Your Credit

Just like getting married, getting divorced in itself does not directly affect your credit score. Your credit report also won't show whether you're married or not. Still, it's important to keep close track of how joint debt is handled in a divorce, because a spouse's missed payments on a debt you share will affect your credit report and score.

Even if a divorce decree says otherwise, you both remain legally responsible for a shared mortgage, car loan, student loan or credit card account you opened together. Creditors consider you both responsible for the debt as a joint account owner, which means your credit can be affected by payment history, and the debt will remain on your credit report. If your credit allows it, you may consider closing joint accounts or splitting them up. Closing accounts can have a temporary, negative impact on your credit score, but the peace of mind you'll gain will likely make doing so worthwhile.

In the nine community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin), debt that one spouse took on during the marriage is considered joint debt, which can make both spouses responsible for it if they divorce. Understand the rules in your state and discuss with a lawyer your options for making an agreement to divide up your debts.

Is Your Credit Important When You Retire?

Retirement planning can require a lot of energy—and, of course, money—over a lifetime. It's important to build good credit and check it closely so you can enjoy retirement when you get there.

Strong credit can help you qualify to refinance your mortgage when rates are low, downsize to a smaller home or finally buy a dream vacation property. If you need to rely on credit cards in a pinch—for medical expenses, for instance—good credit can allow you to pay off debt fast with a low-rate card like a 0% intro APR balance transfer credit card.

The simple fact of earning less money in retirement can lead to a dip in credit scores, or to more difficulty qualifying for credit. If you experience a drop in income, you might find it harder to get new loans or credit cards, unless you have no debt at all and your debt-to-income ratio hasn't changed.

What Happens to Your Debt and Credit After You Die?

When a person dies, that information must first get flagged to the credit bureaus so they can note it on the credit file. This process can help prevent identity theft in the deceased person's name.

Often, family members of the deceased will alert creditors that the borrower has died and that the account should be closed. Lenders then let the credit bureaus know. Accounts for people listed as deceased will be deleted after a year, and a credit file will disappear once there are no accounts associated with it.

If you die with debt in your name, what happens to it depends on whether it's backed by collateral or not. In the case of a mortgage or car loan, the lender has the ability to collect on your debt using the value of those assets. Your estate may pay off those debts or sell property to settle them. Unsecured debt like credit card balances will often also be paid by your estate before your heirs can get money you left them—but only if your estate has the money to pay off the debt. If not, the lender will not be repaid in full.

Credit Over a Lifetime

Credit will stick with you at each stage of your life, starting from the moment you take on your first loan or credit card account. You will likely encounter ups and downs during your credit journey. But as long as you monitor it and take steps to repair it when necessary, credit can be a tool that you'll come to appreciate each time you approach a new financial milestone.

Learn More About Maintaining Credit Throughout Your Lifetime

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