4 Ways to Build Your Credit Score After Divorce
Divorce is as much of a financial hardship as it is an emotional one. Even once the process is complete, you may be left dealing with its effects on your credit score for months or even years to come, untangling the joint assets and debt you’ve accrued with your spouse. It’s important to remember that a judge’s ruling is not always enough to separate ownership of loans and credit cards. The divorce may be final, but joint debt is still the responsibility of both spouses unless otherwise noted by the lender. This means if one of you miss a payment, both of your scores may be negatively impacted. There are steps, however, that you can take immediately to help protect and build your individual credit after divorce.
1. Check Your Credit Report
Start with checking your credit report, even before your divorce is final. This can be done by contacting any of the three major credit bureaus, including TransUnion, Equifax, and Experian. Doing so will allow you and your soon-to-be ex to see your full credit history and identify individual and joint debts.
Individual debts could be loans or credit cards that you opened prior to your marriage. This can also refer to debts you incurred independently after marriage, unless you live in a community property state. You are solely responsible for your individual debt repayment. On the other hand, joint debts could be any loans or credit cards that you’ve acquired together with your spouse in which both parties are responsible for repayment, even after divorce. This can include mortgage and car loans. If one spouse forgets to pay, both may suffer the consequences.
Additionally, checking your credit report will allow you to see which credit accounts have you listed as an authorized user. While only primary account holders are usually held responsible for these payments, identifying which credits cards to remove your name from now could help avoid headaches later.
2. Open New Individual Credit Accounts
Next, start building your individual credit by opening a new credit card in your name. This may seem like the last thing you want to do while dealing with the financial headache caused by your divorce. However, establishing your individual credit now could help you in the long-term. Typically, it’s easier to get approved for a credit card while you’re still married and have joint assets, credit cards, and loans. However, you’ll also have the opportunity to build your credit after divorce. Typical ways to do so include paying down your debt faster, increasing your credit limit, and more. It’s important to remember that patience and persistance is key. Building your credit score typically is a long process, especially when tangled up in a divorce.
3. Close Old Joint Credit Accounts
Now that you’ve started building your individual credit, it’s time to close out the joint accounts you’ve identified on your credit report. Again, this includes any credit cards or loans that you’ve acquired together as a couple. Contact lenders and ask to have your joint accounts transferred into individual accounts. Most importantly, close them. This reduces the risk of acquiring new charges that both parties are responsible for.
Remember to also remove your name from any accounts that list you as an authorized user. You can usually do this by contacting the creditor. Likewise, make sure to remove your ex’s name from any accounts that they appear on as an authorized user to avoid future charges that you will be responsible for. As you begin to divide your joint debts and decide who is responsible for paying them, remember that you are still legally accountable for all missed payments unless otherwise stated by the lender.
4. Pay Your Bills (And Make Sure They Pay Too)
When dealing with both the emotional and financial repercussions of a divorce, it’s easy to forget who is responsible for paying the bills. However, this is one of the most important steps in building your credit score. Work together with your ex or seek the help of a legal or financial advisor to decide who is responsible for paying back each debt. Make these decisions based on your financial capability and be careful not to assign either party with more debt or bills than they can handle. Create a new budget taking into consideration recurring monthly payments and your new single-income status. If one of you miss a payment, there’s a chance it will affect both of your scores. If your ex continues to miss payments, you may have the option of taking legal action against them.
Divorce and your credit score may seem like two difficult subjects to tackle. However, it’s important to remember that you’re not in this alone. By taking the right steps, you can build your individual credit score and prepare for the future.
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What You Need to Know:
There are various types of credit scores, and lenders use a variety of different types of credit scores to make lending decisions. The credit score you receive is based on the VantageScore 3.0 model and may not be the credit score model used by your lender.
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