Liz Weston: Do credit bureaus give weight to a spouse’s score?
Dear Liz: I recently downloaded my wife’s credit reports and my own reports. I have noticed that, for several reasons, his report contains much less information than mine. The likelihood is that I will die before she does, so my question is if you can suggest some ways to make sure she has a good credit rating after I leave. Do credit bureaus give weight to a spouse’s score?
Reply: They don’t, unless the spouse is alive and is a co-applicant.
However, the amount of information in a credit report does not dictate someone’s scores. People can have good scores with just a few credit accounts, or bad scores with a lot of accounts. Your wife should find out what some of her scores are to decide next steps. Her bank or credit card issuer can provide scores, or she can get free scores on one of the many sites that offer them. (FICO is the formula most often used by lenders, but VantageScore can also give it a good idea of ââhow lenders view it.)
If her scores are less than excellent (typically 740 and above), she might look for ways to improve them, such as making all credit payments on time, using only a small fraction of her available credit, and maybe by adding an account or two. Credit loans from credit unions can be a good way to create or rebuild credit.
Dear Liz: As a grandparent who opened 529 accounts for each of my grandchildren, I was particularly interested in your advice to the writer who asked you how to use the money left in the 529 account to pay off a loan debt. Although it looks like âthe horse has already left the stable,â why didn’t the niece use all the funds in account 529 before accumulating student loan debt? Did I miss something?Reply: It is possible that the withdrawals reduced the niece’s financial support, so she chose to take out loans instead.
In the past, the federal financial assistance formula severely penalized withdrawals from 529 education savings accounts held by people other than the beneficiary’s parents. The accounts themselves weren’t counted by the formula, but any withdrawals were treated as untaxed income for the student. The standard advice was to wait until the last financial aid form had been filed to start making withdrawals.
This will change, but not as soon as initially expected.
The Consolidated Appropriations Act of 2021 required that the Free Federal Student Aid, or FAFSA, application form be simplified, removing several questions, including one about whether the student received money from people other than the parents.
The new FAFSA form was due to be released next year, but the Education Department announced in June that the proposed changes would be delayed but implemented in time for the 2024-25 award year. Until the form has been updated, you would do well not to use the 529 if your grandchildren are in need of financial assistance.
Liz Weston, Certified Financial Planner, is a personal finance columnist for Nerdwallet. Questions can be sent to him at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at AskLizWeston.com.