BANKRUPTCY UPDATES

• Minnesota Distillery of Fine Vodkas Files Chapter 7 Bankruptcy (February 10, 2012)
• Court Approves Newspaper Magnate Lee Enterprises’ Bankruptcy Plan (February 07, 2012)
• Suspected Felon Filed for Bankruptcy Shortly Before Untimely Death (February 09, 2012)
• Ireland Overhauls Bankruptcy Laws (February 06, 2012)
• IL State Representative Files for Chapter 13 Bankruptcy (February 08, 2012)

How to Maintain Credit Autonomy in a Marriage

Total Bankruptcy has reported in the past on the importance of keeping track of your credit report and of practicing healthy credit habits in order to make yourself attractive to potential lenders. And one key element of financial literacy is knowing how and why to check your credit report regularly.

A recent piece in the Motley Fool highlights another side of credit health: maintaining credit autonomy in a marriage. In other words, even if you're making most of your financial decisions jointly with your spouse or partner, it's crucial to keep make sure your credit report doesn't go inactive.

Who Uses Your Credit Report?

These days, it's not only mortgage lenders and car dealers who check your credit history to determine what kind of a loan you'll get. Landlords, employers, credit card issuers and insurance providers commonly look at the credit histories of potential tenants, employees and clients. If you and your spouse are maintaining strong credit reports, this is good news for you.

But it may come with a caveat.

There's no such thing as a "joint credit report," but you can make some credit actions show up on both your and your spouse's credit reports. Giving a partner "joint account holder" status allows both of you to take credit for the positive - like bills paid on time - as well as the negative - like missed payments and defaults.

You Can (and Should) Go Your Own Way

So you and your spouse have great credit together. But what happens in the case of death or divorce?

If you and your spouse split, jointly held accounts could present a real headache as you try to determine who gets control of them after the breakup. And if you haven't kept any accounts in only your name active in the meantime, you may find yourself out of luck when it's time to take out a loan, get a new credit card or keep your insurance rates from jumping up.

Reports indicate that, because of the way credit scoring works, a few months of inaction on an account can leave potential creditors with little or no indication of how credit-worthy you are. In as little as six months of inaction, your credit report can become useless as a credit risk judgment tool.

Naturally, that's not a situation you want to face, especially if you're trying to get back on your feet after a divorce.

How to Keep it Alive

Luckily, keeping your credit report active during a marriage is pretty easy. All you have to do is keep open a few of the credit accounts (credit cards) you applied for when you were single. Every few months, make small purchases with these cards and pay the bills completely.

This way, you'll maintain positive action and make sure you have some (strong) credit in your name in case disaster strikes.

For a free credit report from each of the Big Three credit reporting Bureaus (Equifax, Experian and TransUnion), visit annualcreditreport.com.