Savvy Banking: How to keep good credit when you’re not earning money

I’m married & a homemaker. My credit score is great. How do I keep it that way if I’m not earning income?

By David Cherry

I think the most important factor here when talking about keeping your credit great is to budget well and live within your means. You’ve worked hard to get your credit up to where it is. Now you need protect it. Here’s a few steps you can take to keep your credit score safe.

Budget: It’s the number one item on the list. Since you’re not earning income but your spouse is, it’s important for you and your spouse to talk openly about finances. If you’ve never had a budget before, you can follow the general 50/20/30 plan. It basically starts with allocating 50% of your income to every day necessities like food, clothing, mortgage or rent, and transportation. The next 20% would be going to savings and paying down debt. Finally the last 30% would be used for fun stuff like vacations, gym fees, hobbies, and eating out. This plan may not work for everybody, but it’s a good place to start. There are programs you can order online that will help you input and track spending to make sure you’re staying within your budget each month.

Savings: It’s not a matter of if but when an emergency will arise. A hospital visit or stay, car repairs, a major home repair – all of these things can run in the thousands of dollars. If you’re not prepared and able to pay for these things as they arise, you’ll be forced to either charge them on a credit card, get on a payment plan, or borrow the money from your bank or a relative. None of these options are easy, especially if you’re on a tight budget. The danger to your credit here is not being able to pay these debts back. Life can change in a single day.

Organization: A major part of keeping your credit great is to continue to pay bills on time. One easy way to do this is to get them set up on automatic draft or automatic bill pay. The difference between the two is with an automatic draft you have provided a company with an authorization to draft your bank account on the day a bill is due. With automatic bill pay you use your online banking service with your bank to mail a check automatically each month on a specific day to your providers or creditors. Most people structure their automatic payments around payday to ensure that bills are paid first before anything else.

Credit Monitoring: It’s a good idea to check your credit report periodically throughout the year to ensure that everything is accurate. I prefer www.annualcreditreport.com when checking information. You have access to all three credit agencies (Equifax, Experian and Transunion). It’s a good idea to space your inquiries out over 4 months unless you have a big purchase coming up like a car or home, then it may be a good idea to check them all at once to get a complete look at your credit. These reports do not give you your score, however, only the report. You can pay to view your score if you choose to do so.

Life Insurance: My question to you would be, if your spouse passes away unexpectedly, how will you get by financially? If you have small children, it would be very difficult for you to jump into the workforce and begin making it on your own. How will you pay for the home, the cars, or other debts you may have? It’s always a good idea to have life insurance in place. Your spouse may have a policy through his or her benefits at work and you can also work with a local agent to discuss your coverage needs as they change. If you have a good policy in place, you will be able to pay off your home, cars, or other outstanding debts during your time of loss. The last thing you need after a catastrophic event like that is to be worried about money, but the bills must be paid.

To conclude, there are many things you can do to protect your credit. Make sure you’re budgeting well and saving a little each month and you should be okay. It can take a while to build your credit up to a good point, like you already have, but it can tank pretty quickly if you run into trouble. Hopefully you won’t have to worry about the latter. Take care.