5 Habits that Can Lead to Bad Credit or No Credit for Stay at Home Moms

Deciding for a parent to leave the workforce to care for a family is a big one for a couple.  As the couple analyzes their finances and their current and future financial goals--they agree to live and budget their family life on one income.  This decision often comes with some apparent sacrifices--like skipping a few vacations or paring down holiday gift costs.  The decision to become a stay at home mom carries some other financial risks for women that many fail to realize until it is too late.  While these certainly do not apply to all stay at home moms or all family financial situations--there are some common, careless habits that can lead a woman to find that she has bad credit or even no credit after years of raising her family.

Photo Credit

Stay at Home Moms Often Stop Building Credit Histories.  The husband has the verifiable income--so the husband often takes on the debts--and continues to build his credit history.  Some women realize that they have few (or no) credit reporting accounts on their credit reports; thus, no established credit worthiness after spending years as a stay at home parent.  Stay at home moms should always (always always always) continue to carry some of the family's credit reporting accounts.  These may not be large accounts, like home or car loans--but, utilities or credit cards which list mom as the primary or sole account holder help her maintain her credit history during her marriage.  With limited credit history, she may even find herself needing bad credit loans in the future to help her rebuild a limited or nonexistent credit history that wasn't "bad" in traditional terms of payment history or defaults.

Stay at Home Moms Stop Building Personal Savings.  We all hope that our marriages will last forever--or that we won't lose a spouse.  For women who give up careers to care for families; they often give up building savings accounts or contributing to personal retirement funds or long-term care plans.  Many women put themselves and their financial security at the bottom of the family's single income budget.  It is crucial that women continue to build personal savings accounts and, even small, nest eggs for the future.  If an unexpected divorce or tragedy strikes, the stay at home parent may need a safety net to get back on their feet without going into massive debt and damaging her credit.

Stay at Home Moms Often Leave Finance Management to the Working Partner.   It is surprising that many stay at home moms become detached from the family's day to day finances.  Some may not even know account balances or details on the various accounts.  Sometimes this happens purely from a division of labor between the couple--but, sometimes it happens because women feel that if they are not contributing to the family's earnings--they have less say in the family's spending.  It is essential that both the working and the non-working parent know all of the details about the family's finances.   While it is easy to hope that the bill-paying partner handles the finances correctly--taking a hands-off approach may lead to some sad surprises down the road.

Stay at Home Moms Cannot Give In to Spending Pressure from the Kids.  Logically, when Mom is home with the kids all day every day, she becomes the recipient of more of the "wants and needs" of the kids.  If a requested purchase isn't in the budget; Mom must say no.   This pressure sometimes makes Mom feel like the constant "bad guy"--always saying "no" or always negotiating.  However; giving in to spending requests too often breaks the family budget and could increase debt that may hurt credit ratings over time.  Stay at Home Moms need to stay tough when faced with these requests--and it isn't easy when kids may not understand that "all of their friends" may be living with a much larger, two-income budget! 

Stay at Home Moms Stop Seeking Financial Advice. Unfortunately, many stay at home moms see their position as short-term--and plan to resume building wealth once the kids are grown, and they return to the workforce.  There is often an assumption that the family is making temporary sacrifices and will "catch up" someday.  One income couples should still seek financial advice and continue to make contributions to college savings plans, personal savings or retirement investments.  The stay at home parent should always have an individual financial plan, know how the family's investments are owned--and develop a strategy for the future.  Failing to seek financial advice may be fine in the short term--but, could certainly lead to unexpected credit problems down the road.

While being a stay at home mom is a rewarding experience, there are simply some money mistakes that women may make along the way.  Avoiding the habits noted here may help you avoid some of the more common habits and mistakes that may damage your credit.