Divorce and Credit
If you’re recently divorced or separated, then you’ve entered a new phase in life that can dramatically affect your credit. Now more than ever, it’s important to be informed about how to handle the credit decisions you’ll have to make-because what you don’t know CAN hurt you.
To begin, take a look at the following steps. They’ll tell you how to establish a favorable credit history on your own and protect your good name from the credit blunders of a former spouse.
Five Steps to Starting Over
This will give you a clear picture of what your current credit history looks like and will provide you with the information you need for the next four steps. Click here to find out how to order a copy of your credit report.
If possible, work with your ex-spouse to analyze all your debts and decide who should be responsible for each account. Once these issues have been decided, call your creditors and ask them to transfer your joint accounts to the person who will be solely responsible for payments. Be aware that creditors are not obligated to make these changes. In some cases they may require that the person who will be responsible for making payments re-qualify for credit as an individual before transferring the account into his/her name (this is especially true for mortgages). If a creditor does not agree to transfer joint accounts to an individual, then both of you are still responsible for full repayment to the creditor, regardless of how you’ve agreed to split the bills in the divorce settlement.
Start small and build up. Apply for an individual credit card account that has a small credit limit, perhaps from a local department store or financial institution. Pay your bills on time. After six months have gone by-long enough to prove you can handle the first card-apply for another card. If you can’t qualify for new credit on your own, ask a relative or friend with an established credit history to co-sign your loan or credit application. Another option is to apply for a secured credit card with a local bank. Of course, you should avoid running your debt up beyond what you can afford to pay. And be careful not to obtain too many new cards. One or two should be your maximum.
The best way to prove that you are a good credit risk is to consistently pay your bills on time. Your payment habits during the first two years after being divorced or separated are especially important to creditors in deciding whether you will live up to your obligations now that you are single. So make prompt payments a priority!
Making ends meet as a single person may seem like an overwhelming task. But don’t make the mistake of filing for bankruptcy without exploring your options. CCCS-OC can help you establish a budget and create a Debt Management Plan to repay creditors that remain after the divorce. Contact CCCS-OC for more information.