It’s not uncommon in many vet and military households to have one spouse or partner who is the major breadwinner and a second spouse or partner with a smaller income or no income. As far as the world is concerned this is a perfectly-acceptable financial arrangement as long as the bills are being paid – except when it comes to credit cards.
As federal credit card regulations have been written it’s been enormously difficult for an individual with limited income or no income outside the home to obtain a credit card, even though it’s the couple’s intention to fully repay the debt. The problem is buried in federal rules which say issuers cannot provide credit cards to individuals in their own name unless they have an “independent ability” to pay the debt.
You can see where this is a problem: An estimated 16 million households have joint checking and savings accounts and yet there is not equal access to credit because one person works outside the home and the other doesn’t.
The best way to establish a good credit score is to actually use credit in a responsible manner. This is difficult to do if you can’t get a credit card in the first place.
What happens with many people is that they build credit over time by first applying for credit cards with small limits, such as cards for gasoline and department stores. As such cards are used over time limits rise and it becomes possible to get other forms of credit.
Credit is Key to Homeownership
All of this becomes especially important when it comes time to finance a big item such as a house or car. Lenders want to know the credit standing of both parties and if one has been unable to get credit that impacts credit scores and thus the ability of the entire household to acquire a VA loan or new-car financing. Worse, should something happen to the main breadwinner the other person may have insufficient credit to maintain household finances.
The new rule “allows credit card issuers to consider income that a stay-at-home applicant, who is 21 or older, shares with a spouse or partner when evaluating the applicant for a new account or increased credit limit.”
Changes to the credit card regulations are expected to go into effect later this year — a precise date has not been established. However, the implications for VA mortgage borrowers are clear: More equitable access to credit can help vet and military households establish stronger credit reports and thus easier access to VA mortgages.
Photo courtesy Anne Rossley