Exploring Credit Post Divorce: Tips for Establishing or Rebuilding Personal Credit

 Posted on June 27, 2016 in Family Law

Not only is divorce an emotional experience, but it is also one that perhaps can cause havoc with your FICO credit score. Once the divorce dust has settled, many women are often faced with financial difficulties resulting in a decline of their personal credit score. Others may be left wondering how they can establish their own personal credit history.

Consider this hypothetical situation, “My ex-husband had gotten us into a lot of debt, mainly through his business transactions of which I was not a part of. How do I fix this?"

The answers may seem allusive and even overwhelming, but taken one step at a time, the resolution of credit report problems can be rectified. Although it will not occur overnight, facing derogatory credit head on can mean a better credit report is within reach.

The following tips are a primer to begin building a fair credit report and a brighter financial future.

Becoming Familiar with Your Credit Report

The best way to repair your credit report is to pull a copy of your credit report from the three leading credit score reporting agencies:

• Equifax;
• Experian; and
• TransUnion.

After receipt, review and compare each individual credit report as well as your overall credit score (FICO) to determine what is negatively affecting your credit score.

Make it a practice to request your free annual credit report from each of these agencies to note changes or further discrepancies.

Seek Additional Income and Institute a Budget

The number one rule to rebuilding credit is to pay all bills on time. This action requires a steady income aside from alimony and child support payments to ensure you are meeting all monthly obligations.

The next step is to institute a budget and to learn how to manage and maintain that budget. If your former spouse handled all transactions, research personal finance educational periodicals or perhaps sign up up for a personal finance course.

Controlling Divorce Debt

Before signing on the dotted line, make sure that all joint debt associated with the marriage has been reviewed and resolved. If not addressed, the actions or non-actions of your former spouse will continue to affect your credit score.

During divorce negotiations would be the opportune time to close joint credit accounts as well as considering refinancing, debt consolidation or balance transfers for accounts in your name only. If certain bills are unmanageable, consider employing the services of a reputable credit counseling agency.

Creating a New Credit Identity

If possible, consider reverting back to your maiden name if you are thinking of establishing a new credit source. It is also suggested to call existing creditors and make the name change as well but be reminded that changing your name will not alleviate any bad credit associated to your social security number.

Establishing Personal Credit

The key to establishing or repairing your FICO Score is to demonstrate an ability to handle credit responsibly

If you and your former spouse enjoyed a favorable credit score then establishing credit on your own may not be difficult. Better yet, if you maintained credit in your name alone, you have an additional advantage.

If you need to rebuild or establish credit with derogatory credit marks, consider applying for a secured credit card. One credit rule to follow is to make all payments on time and keep all credit card balances below 30 percent of the total credit limit.

Once you have built a solid financial foundation and have established personal credit accounts, the key to maintaining a favorable FICO credit score post-divorce is to borrow only an amount you can afford to repay as indicated by the credit terms.

If you are considering divorce and the distribution of marital property or the satisfaction of marital debt are of concern, consider contacting the Hinsdale divorce attorneys of Martoccio & Martoccio. Over the past 35 years, our legal team has built a strong reputation for strongly advocating for the rights and interests of our clients. Contact us at 630-920-8855 to schedule your complimentary initial consultation today.

Sources:

https://www.creditkarma.com/question/credit-repair-after-divorce

http://www.fico.com/