Applying for joint credit — whether it’s in the form of a credit card, mortgage, or personal loan — can be a great way to boost credit limits, lower interest rates, and help the credit score of a spouse or loved on who co-signs the application with you. But this process is not as easy as some might think, and there are some important considerations to make both before and during the application period. These tips will save you time and anxiety as you pursue your joint credit application and ensure you get the best deal possible at the conclusion of your search.
Review Each Individual’s Credit Report
There’s absolutely no need to go into a joint credit application process without knowing both individuals’ credit scores. That’s because credit reports are generally available online without much of a hassle — simply provide your personal information and review the credit score that follows. You’ll need this information to help you decide which person will be the primary applicant. As most people know, higher credit scores lead to higher credit limits, better interest rates, and a greater likelihood of approval when submitting the application to a credit card company or lender.
Discuss Income Levels and Personal Debts
In the case of a credit card, a simple credit score might be enough for the credit card issuer to make a sound decision and reward the card to the person with the highest score. That person is also likely to receive the best terms on the credit card. However, there is something to consider if your joint application is for a loan or a mortgage: many lenders will pay less attention to the actual credit score and more attention to the highest income. That means the person with the lower credit score, with the higher income, may be the primary applicant. They may even have a better chance at approval.
Lenders who issue personal loans and mortgages are more interested in the income-to-debt ratio than simple credit scores. And while a high credit score certainly can’t hurt individuals on a joint credit application, it’s worth knowing exactly who is best-qualified for the specific financial product you’re applying for. And sometimes, that goes deeper than a simple three-digit credit rating.
Select a Credit Card Issuer or Lending Institution
Once you’ve fully fleshed out each individual’s creditworthiness and financial details, it’s time to compare. There are numerous comparison sites out there (like Credit Card Compare for Aussies) that are dedicated to helping you get a better deal on the credit that your looking for. This is perhaps the most essential part of the process, as it helps to determine where the best limits and rates will come from. Different financial companies will offer different rewards and bonuses to their applicants — some will be credit-based, but not all of them.
Credit card applicants should look for things like “cash back” bonus programs or cards that earn points toward rewards and future discounts. This is a great way of making your money — and your credit — work for you, rather than against you. Of course, credit card applicants and joint loan or mortgage applications will both want to look for the best interest rates, fee schedules, and limits on their borrowing. This can be an extensive proess, but it’s necessary for a sound financial future in the long-term.
Avoid Big Purchases Before Applying
This especially applies to mortgage applicants, but it’s helpful across the board to any joint credit applicants: don’t go on a shopping spree in the lead-up to your application. You don’t want to look financially unstable, or like a spendthrift, in the eyes of someone who is assessing your financial risk to their institution. Keep your debt loads light and your bank account fat.
Send the Application Digitally
Using an online application is a much better way of applying for joint credit instruments like credit cards and personal loans, as a decision can be reached in minutes or hours instead of days. And, for what it’s worth, you’ll save on postage. An instant decision helps you better know whether to continue applying elsewhere or whether your search is over. And it’s always better to know that sooner, rather than later.
Applying for joint credit shouldn’t be too difficult when all of the right steps and precautions have been taken. Know what you’re working with — credit scores, financials, and other information — and know where the best deal is.
Matt Polo is a writer for The Credit Letter, an Australian finance blog. He also write reviews on balance transfer credit cards.
Photo Credit: Robert Scoble