Deb

“Dear Steve,

I’ve been married for 17 years, I let my spouse take over finances for a 2 year period and found out end of last year that we were completely overextended (even though income is good), and more importantly have mutliple late payments on probably every account/credit card we had.

Some in his name, some in both our names. I took control of finances back in January. I closed out every credit card we had open. I got my $11,000 bonus and used it to pay off some smaller cards. I made my husband take out $23,000 from his 401K and we paid off the remaining debt with the exception of a $20,000 “loan” from capital one and a $13,000 balance on a bank of america credit card. (this is AFTER we paid off the rest of the cards).

Thankfully our mortgage is very reasonable. So now, day to day living is pretty good, paying bills timely, no phone calls from creditors – however we have absolutely no backup. We tried to get add’l money on our home equity loan – but were turned down due to “too many delinquent accounts” on our credit history. If something were to happen where we suddenly needed cash – I don’t know what we would do. We have about 9K still left in savings. (we both have good life insurance policies).

Based on the above, should I try and get a credit card in my name only? Would switching banks and developing a new relationship help? I’m a little panicky about this situation.

Deb”

The Answer

Dear Deb,

The situation is unfortunate, but it does happen. Goodness, look at all the valuable lessons you learned from this. I always say there is no sense wasting a perfectly good mistake, so taking something away from it is good.

For whatever reason, your husband sucks at managing the money. I suspect that in your relationship he is the spender and you are the saver. Opposites seem to attract in relationships on one person is typically the spender.

Your husband may be someone who just does not think about money the same way say an accountant would. But then again I’ve had plenty of accountant clients over the years.

If you do decide to give him a second chance on letting him manage the finances again, may I humbly suggest that it be a cooperative effort. You might even want to consider getting a copy of your consolidated credit report once a year and sit down together and review it.

Since you closed all your old accounts, and I wish you had not done that, you will only be able to bring your credit score back up will be to get a new credit card or installment loan. Otherwise your credit history ends with the reporting of negative information about you. Applying for a couple of cards in your name alone would help you to do this.

And while it feels like you are living on the edge with only $9,000 in savings, you have a lot more than most people do.

What I’d suggest that you do is open the two new cards, use them, pay them off as you go, and get back to stashing some additional cash in a savings account each month.

Oh yes, switching banks won’t help. Your credit score follows you everywhere you go.