How Do You Establish A Credit History
Below is a MRR and PLR article in category Finance -> subcategory Credit.
How to Establish a Credit History
Introduction
Building a credit history can feel like a Catch-22: you need credit to get credit, but without credit, you can’t get approved. Here’s how to break the cycle and start establishing your credit.
Getting Started
If you’ve been denied a loan or credit card due to a lack of credit history, there are steps you can take. Start by applying for a small line of credit with your bank or a department store credit card. Ensure you list your best financial references and consistently make payments. Verify that your creditor reports your credit activity to a credit bureau.
What to Do If Your Spouse Passes Away
Under the Equal Credit Opportunity Act (ECOA), creditors cannot automatically alter or close a joint account solely because of your spouse’s death. They may, however, ask you to update your application or reapply if your spouse’s income was part of the credit decision.
Upon reapplying, the creditor will determine whether to continue your credit or adjust your limits. You should receive a written response within 30 days, and you can use your account as usual during this time. If your application is denied, you must be informed of the reasons or your right to learn them.
These protections also apply if you retire, turn 62 or older, or change your marital status or name.
Understanding Account Types
It’s crucial to know your account types, especially if your spouse dies. There are individual and joint accounts, and authorized users can be added to either.
Individual Accounts
An individual account is opened in one person’s name based solely on their income and assets. If you're worried about being affected by your spouse’s passing, consider opening individual accounts in your name.
When applying for individual credit, request that the creditor consider the history of accounts in your spouse’s name if they reflect well on your credit management skills. Canceled checks can demonstrate your payment history on an account listed solely under your spouse’s name.
Joint Accounts
A joint account is shared between two people, such as spouses, relying on both individuals' incomes and assets. Both parties are responsible for the debt.
Authorized Account Users
For individual accounts, you can authorize someone else to use it. If your spouse is named as an authorized user, the creditor must report the credit history in their name as well, provided the account was opened after June 1, 1977.
If You’re Denied Credit
While the ECOA doesn’t ensure credit approval, it guarantees your right to know why you were denied. Sometimes, errors or incomplete evaluations occur. In such cases, request a reconsideration from the creditor.
If you suspect discrimination, consider contacting the federal agency overseeing that creditor, providing a detailed complaint and supporting documents. You might also consult an attorney, as you have the right to sue under the ECOA.
You can find the original non-AI version of this article here: How Do You Establish A Credit History .
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