Everyone should develop and manage their own credit history from age 18

I came across the article below from last month’s Globe and Mail and could not agree more with the author. But I will take it a step further. EVERYONE should keep and maintain his or her own credit history – even if you are averse to debt of any kind.

Even if your credit history is in bad shape right now – don’t give up on it – the time is your friend – and all the open wounds and scars from the past will disappear in time.

I advocate every young person begins establishing his or her credit history as soon as they turn 18 – and to consciously manage and build it so that by the time they hit their twenties, they will not be impeded in their efforts to buy or lease a car; rent an apartment; secure a mortgage; apply for a line of credit; apply for that sexy credit card loaded with rewards features, etc. etc.

Some people admirably live their lives without any use of credit – they go by the philosophy, if I don’t have the money – I ain’t buying it.

I had two thirty-something clients in the office the other day who had no credit history at all. They had saved $120,000, and owned their own cars, and were quite self-sufficient. They decided it was time to buy their first home together.

Let me tell you, that was a difficult mortgage to place – they qualified in all other respects – but no credit history means lenders cannot assess your willingness and ability to repay a debt obligation – even if logic dictates that clearly you are solid people.

The article below focuses on couples – and the need for both to establish their own individual credit histories – especially true when one partner makes a larger income, and credit applications are traditionally keyed on that person – with perhaps the lesser income person tagging along with a supplementary card.

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Couples should keep their own credit histories

By Angela Self
From The Globe and Mail February 09, 2010

Even if you’re happily coupled, you need credit in your own name. Start building it today.

I made a common money mistake in my early 20s: I combined all of my finances with my live-in boyfriend’s. It seemed like the smart thing to do at the time. As it turned out, not so much.

After we separated, I could not qualify for even a credit card in my own name. Even though I co-owned a condo and made regular payments on our joint card, I had not built up any credit history of my own. As far as the banks were concerned, I did not have a financial identity.

I’m not alone in this one. I have met many couples who combine all areas of their finances, including credit cards, lines of credit and bank accounts.

Having a joint account is important for couples. It’s a place to funnel money for shared expenses and common goals. However, having an individual account and credit in your own name is equally important.

It’s not about hiding purchases from your partner, as you should each know what’s coming into and what’s going out (dollar-wise) of all accounts. Rather, it’s about maintaining a level of independence, financial identity and know-how.

Bottom line: Even if you’re happily coupled, you need credit in your own name. Start building it today.

Angela Self is one of the founders of the Smart Cookies money group. Read her biweekly column on managing debt and saving money at globeinvestor.com [http://www.theglobeandmail.com/globe-investor].

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