Divorce is difficult emotionally, legally, and financially. Sometimes people don’t think about what joint accounts can do to hurt their credit reports until they finally look at their credit scores. Don’t let mixed assets affect your credit report after you file for divorce. Here are some ways to prepare to separate your credit and steps to regain your financial independence.
Remember that divorce is only recognized by the court. A divorce will not automatically separate you and your spouse financially. All accounts and financial debts held jointly will have to be reconciled jointly or transferred from one party to the other.
credit separation
1. Contact any lender about the outstanding debt. A collection agency may attempt to contact you long after the outstanding debt has been removed from your credit score. If you have any outstanding debt from your marriage, find a way to pay it off or have the lender take it out of the contract. You may need to get your spouse to agree to the agreement, and he or she may need to show a creditor that the debt can be managed on an individual basis.
2. Always pay the debt during a divorce proceeding. In some cases, a spouse may try to use credit cards in an effort to hurt the other party with high balances and debts. Pay joint bills to prevent one bill from hurting your credit score. Close accounts or have your account removed to prevent further abuse.
3. Close accounts that cannot be reconciled. This will ensure that no new debts are added to your accounts if you have trouble paying off or canceling them.
4. There is no need to separate your credit reports. All credit reports are issued to people regardless of marital status. Making sure all joint accounts are reconciled is the most important credit factor to consider after divorce.
5. Your ex-spouse may not receive your credit report after the divorce is final. There are several ways a report could be accidentally sent to an ex. If he or she has identifying information for you, her credit report may be accessible despite the reporting bureaus’ identity protection precautions. You may have grounds for a lawsuit if your ex-spouse obtained her credit report illegally.
6. Have your ex-spouse removed from your report. Although your report is completely self-contained and having a spouse’s name on it will not affect your score, removing your ex as your spouse from the list may clarify your situation to anyone accessing the report.
The end result is to reconcile any accounts that you and your ex-spouse have jointly. Although divorce will never have a direct impact on your credit score, the status of joint accounts can negatively affect the credit reports of both parties.
credit rebuilding
If your former partner caused damage to your credit before or during the divorce proceedings, you may need to take steps to rebuild your credit. If she hasn’t had an account individually in several years, she may also have a lower credit score than she would like as an independent individual. Follow these steps to rebuild your individual credit score.
1. Change your name. You will need to establish your credit as an individual. While changing your name won’t erase existing debt, it will help you build your individual credit apart from your ex-spouse.
2. Gain financial independence. The sooner you take steps to regain financial independence by getting a job, paying bills, and other financial needs, the sooner your credit score will improve. Child support and alimony will supplement the income in a usable way, but you should never be completely dependent on these two sources of income.
3. Take steps to handle bills you can’t pay. Contact a credit counselor or repair agency to help you overcome financial difficulties after a divorce. There are several different ways to handle debt after a divorce, and a credit counselor can help you determine the best course of action for your situation. Leaving bills you can’t pay unattended will only worsen your credit score over time.
4. Successfully use a credit card. Even if you don’t use it for extravagant expenses, use a credit card once in a while and pay the bill every month. Responsible use of credit cards is one of the best ways to rebuild credit. The cards must be in your name as an individual, not a joint card from your marriage. Sometimes joint accounts that weren’t paid responsibly can prevent you from getting a credit card. In this case do the following.
A. Make sure the card is closed. As long as a jointly owned card is open, it has the potential to affect your credit score.
B. Apply for a secured credit card. If you can’t get a regular credit card, a secured card will be available with a cash deposit or collateral. You will only be allowed to use the card for the amount of deposit you made at the beginning, but it is a successful method of building credit. It also has the advantage of being a more secure payment method than a debit card.
5. Keep balances on all cards low. Ideally, your credit card balance should never exceed 35%. If you need to spend more on the card, pay several times a month instead of waiting until the expiration date. Doing so will ensure that the credit bureaus do not receive inaccurate information about your accounts during the month.