Stay-at-Home Moms & Dads Watch Out!
Added: 10/11/11 Stay at Home Moms & Dads Watch Out! Rookie Version Perfect for “beginners” & the “In a Rush-ers”! Stay at home Moms & Dads who work the home-front while their spouse earns the family income will see a different question on the credit card application the next time they want to take advantage of opening up a credit account! The application used to ask for “household income” which included both spouses income. That is now passee! As of October 1st, 2011, the application now says “individual income,” “your income,” or some variation of this. The federal government has told the credit card companies they may no longer consider the combined income of both spouses when issuing new credit cards. Yes, believe it or not, this is basically saying the stay-at-home Mom or Dad is assigned zero value for their work! The individual applying for the account must show they have the "individual ability" to pay for the account from their own salary or assets. Advocates of the new rule claim that stay-at-home spouse will be protected from taking out too much credit, which may cause problems in divorce situations. So now what? IMPACT: It will be much harder for stay-at-home spouses with no income to get a credit card and to build credit! Some embarrassing situations may occur too. Imagine being at the register of your local retailer and being told to call your spouse to get their permission to open up the credit card? Why is this important? Credit is very important! It allows you access to borrow money or open up credit cards. Some employers use your credit to evaluate you during the hiring process! Good credit gets you a lower mortgage payment, lower insurance premiums, and is needed in order to obtain utility, phone and cable service. Rockin' Finance™ owner Felicia Voloschin, CPA, CFP® has sat with more than one divorced/widowed spouses who had little or no credit and found it extremely difficult to have even the basics transferred into their own name. What should I do now? If the stay-at-home spouse has existing credit cards, use them a few times a year to keep them active. You may have trouble reopening them if they are automatically closed for inactivity. So keep them active to keep them open and always pay on-time! Are the utility bills in the stay-at-home spouse’s name? Opening up credit cards/utility accounts jointly with the working spouse and listing the stay-at-home spouse as an “authorized user” usually helps (but it may depend on the reporting policy of the credit card company). When transferring these accounts into a joint account, the agents will need to speak with the wage earner of the household. Our 2012 online Rockin’ Finance series will have several sections on keeping good credit. Have a general question or need some personalized help? Click here to contact Rockin' Finance™! Note: The new rules do not apply to community-property states. So if you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin the new “individual income” rules do not apply. You will see no changes in your credit card applications at all!
The Federal Reserve issued the rules for the Credit Card Accountability & Disclosure Act of 2009 (referred to as “The Card Act”). It’s goal was to enhance consumer protections for consumers and card issuers and contained the requirement that card issuers consider consumers repayment ability before opening or increasing their credit. The Federal Reserve issued the rule on March 18, 2011 clarifying The Card Act. A credit card company may only consider an individual’s own salary or other income when being considered for credit. “Household income” may no longer be used when only one person is applying for the account. The words in The Credit Card Act of 2009 that were in question were “independent ability” and “regardless of the consumer’s age.” It was thought that the rule would only apply to applicants under the age of 21. The Fed clarified this not to be the case in the ruling. Here is the ruling from the Federal Reserve if you would like to read it yourself: http://www.federalreserve.gov/newsevents/press/bcreg/20110318b.htm Our 2012 online Rockin’ Finance™ series will have several sections on keeping good credit. Have a general question or need some personalized help? Click here to contact Rockin' Finance™!
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