Episode Transcript
[00:00:00] Speaker A: It is Take Control Tuesday. That means Mansa Musa from MoneySmartLife.org is on the phone with me and Mansa. People are dealing with their finances right now in a real, real way. And you have some advice for those who are married today, right.
[00:00:17] Speaker B: Or domestic partners or that you share a joint account with.
And basically what we want to tell people is when you're working on your finances, when you're a couple, you want to look at how you're managing your finances both as a couple and individually.
And one of the things that I would suggest is if you're married and you have joint accounts, is to reduce the number of joint accounts that you have. Now, joint accounts are normally like credit cards, mortgages, installment loans, you know, car loans, those kind of things.
Now, the reason that they're joint accounts is because the creditors prefer them. Creditor wants to be able to collect from as many people as possible. If it's a joint account, then that means I have at least two people I could possibly collect from because they're both responsible for the whole balance.
Now, here's the thing. When you have a joint account, each person only has so much credit capacity. In other words, how much people will lend you. When you have a joint account, you're sharing that capacity. If you separate that and don't have joining accounts, if you both have individual accounts, you just doubled your credit capacity. So here's what I'm talking about. There was a time when I was a real estate investor before the crash, and the limit was five mortgages. That was the most I believe, that you could have. Well, if my wife and I each applied separately and that gave us five mortgages apiece. If we had applied jointly, we would have only gotten five mortgages. A couple got it. That doubled our capacity. Right, right. When you don't have joint accounts, it provides you individual control over your credit score. Remember, 30% of your credit score is balanced to limits or credit utilization ratio.
If you have a joint account, then you're both sharing the same credit utilization ratio. You're sharing the same limits. If you have individual accounts, you just doubled all of that. And when you have joint accounts and you get divorced or separated and they're responsible for the credit card bill and they stop paying it, it negatively impacts your credit. And trust me, as a financial capability coach, I've seen that happen a lot. So we've talked about this before, Randy, and what a joint account will do. Will it insulate you from std, which is spousal transmitted debt? Oh, gosh, shoe it's debt you get from your spouse. Now, worse than that is what we call an ex std, which is transmitted debt from your ex, which I'm telling you, if you maintain joint accounts, your ex spouse can maliciously do damage to your credit. Yeah, we're talking about credit and not ownership or title. When it comes to the mortgage, for example, on my house, it was only in my name, but my wife and I, both names were on the title, and she maintained all the rights of ownership, et cetera and so forth. But only the debt showed up on my credit report, which, of course freed her credit report and gave her more capacity to do what she wanted to do. Wow. In summary, we're not talking about ownership or title. We're talking about credit. You increase your capacity as a couple, you protect your own credit score individually. When you don't have joint accounts, if you still want the person to be on the account, you make them an authorized user. They get their own credit card if you give it to them. And they can charge as much as they want, but they're not responsible for the bill.
[00:04:11] Speaker A: Okay, that is some sound, sound advice. And if we can give that information to everyone on our website at takecontroltuesday. Com. And also when you go to takecontroltuesday. Com, make sure you share this with everyone you know. As always, Manta, thank you so much.
[00:04:29] Speaker B: Thank you.
