Taking Credit for Yourself
It's essential that every individual establish a personal credit rating. If you find yourself suddenly single, it will be hard to get credit after years of not having any. Also, some guidance for establishing proper tax withholding.
By Barbara Eisner Bayer (TMF Venus) and Ann Coleman (TMF AnnC)
November 14, 2000
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Q. I had a credit card of my own before I got married. I no longer use that card because it has a $500 limit. Now that I am married and using my husband's credit card, do the purchases and payments count toward credit for me too if we were to separate? I've been told that if I get a divorce I might be stuck without any credit. If I simply get my name put on the account as a joint holder, would this help?
A. Definitely, you need to establish and keep a credit rating of your own. But, it's not as simple as having your name put on the account.
Any resident of the known universe can be added to your husband's account as an "authorized user." Adding authorized users is a win-win for the credit card companies. More users equals more charges equals more money for the credit card company. But, your husband, the main account holder and the known quantity, is solely responsible for paying off those charges. As the owner of the account, his is the only name that is reported to credit agencies. Being an authorized user does diddly for your credit rating.
Being a joint holder is different, but it's not simple. In an informal survey of the credit card companies we happen to have customer service numbers for, one of the three said it didn't allow joint accounts anymore. All it offered was authorized user status. The others would allow joint accounts, but it wasn't just a matter of adding a name. It was more like opening a joint bank account. You may even have to do the credit application thing.
With a joint account, both you and your husband will be responsible for paying that bill. That's something to consider if you have any concerns about your financial compatibility. The future lasts a long time, and people change.
A "joint" credit card will affect the credit records of both spouses. Think about that a bit. After the wedding isn't really the best time to be asking this question, but is your hubby someone you want to have influencing your credit? Every couple needs to work out their own style of handling money. You can go for all joint accounts, totally separate accounts, or some blend. About the only thing you really don't want to do is have everything in one name. It's not just because of divorce. People die, become incapacitated, and go missing in the Bermuda Triangle. Everyone needs to have a personal history of financial responsibility, so that whatever life hands them, they can cope.
But, you have a simple solution. You already have a credit card in your name. Use it! Even with a limit of only $500, you can use it to buy groceries and other small items. Just pay off your balances every month, so you can show a history of timely payments. Once you establish that history, the credit card companies are usually very happy to increase your limit.
Which brings me to Getting Out of Debt. You didn't say you were in debt, but even if you both have spotless credit histories, if you're like most newlyweds, you'll be under a fair amount of spending pressure as you set up your life together. You know, monogrammed bath towels, his and hers exercycles, a house.... It might be a good idea to review what can go wrong with credit cards to help stave off temptation. That link will help.
Q. I am one of those people like the person with a friend who gets the big tax refund come tax time. I would like to know what you recommend for me to claim on my deduction form. I am single, head of household, and have three children. I can really use extra cash.
A. If you're single with three kids, I'm surprised you even remember how to spell "extra cash." By all means, take advantage of proper withholding, but keep in mind that underwithholding can result in a bill from Uncle Sam. There goes the extra cash! You don't want a big tax refund, but a little one tells you that you withheld just enough and avoids writing that most dreaded of checks.
I can't tell you exactly how many deductions to claim, but if you have just one job, I'm seeing at least eight based on what you described. Depending on your income and possible childcare expenses, that number could go up, even before you start looking at itemized deductions.
Go to your employer and ask for a W-4 or download it from the IRS website. On the back is a worksheet that will help you determine the correct number of withholding allowances to claim if you have itemized deductions.
By the way, there's an error on that worksheet. The worksheet tells you to enter adjustments to income such as alimony, student loan interest, or deductible IRA contributions. Those items act to reduce your taxes. But the form assumes you are paying alimony. If you are receiving it, don't enter the amount on that line or you could find yourself with a huge tax bill. (Yep, voice of experience.) If you are receiving alimony, you should deduct the amount you are receiving from your itemized deductions, or reduce your withholding allowances by one for every $3,000 in alimony received.
Child support isn't a problem. Child support is not deducted by the payer or added to the income of the recipient. Alimony is.
Another useful IRS publication is IRS Publication 919, How Do I Adjust My Tax Withholding? Here you'll also find worksheets to help you decide whether you're withholding the correct amount. Finally, if you have TurboTax (or, probably, any other tax software), the tax-planning module will guide you through this process.
