credit recovery

Guide: How to Achieve Credit Recovery After Divorce

Are you worried about credit recovery after divorce?

When you go through a divorce, finances are often the last thing on your mind — at least at first. But soon, the toll the process can take on your financial life becomes apparent. Divorce and credit is no joke, and you may find yourself with a lot of rebuilding to do.

It might seem impossible right now, but credit recovery after divorce can be done. In this guide, we’ll show you exactly what you need to do to protect your financial future. Keep reading to learn more!

Protecting Your Credit Through Divorce

If you can, take steps as early as possible in the process to protect any good credit you have.

When you get a divorce decree, you’re not off the hook for joint debts that were taken on during the marriage. Instead, you’ll still be responsible for payments on any joint account. This includes credit cards, mortgages, and car loans.

Even if your former spouse is ordered by a judge to pay a bill, it’s still your responsibility to make sure it gets paid, because your credit is at stake. If the responsible ex-spouse fails to pay, both of your credit becomes damaged.

The lender (such as a bank or credit card company) is legally allowed to make a negative report to a credit reporting agency if an ex-spouse makes a late payment. If they don’t make any payment, you’ll be responsible for paying, or facing the consequences.

How can you protect yourself and your finances? Here are a few smart steps to take.

1. Close Any Joint Accounts

As soon as you can, work to close or at least separate your joint accounts. If you can, talk to your former spouse so you can work through this process together. It’s much harder if you try to do it alone.

Look at all the debts, and make a decision as to who will be responsible for each one at the end of the day. Then, call the creditor in charge of each account to find out how it can be transferred to the person who will be responsible for payments.

Keep in mind that even if you’re no longer on the account, you could still be held legally responsible for making sure payments get made. However, if the creditor agrees that you’re released from responsibility, you’re no longer legally attached to those debts.

2. Figure Out Properties

If you bought a home together, you could have to refinance it in order to remove one name from the mortgage. Of course, another option is to sell the house and split the profits.

3. Continue Making Payments

While your accounts are still together, it’s crucial not to miss any payments. Even while you’re in the throes of divorce negotiation, make sure you’re making the minimum payments at the very least. If you miss just one payment, it will continue to mar your credit profile for as long as seven years. If you want to build credit in your name, it will become very difficult with that mark against you.

Some people might advise you to run up debt to get back at your spouse. However, this harms both of you, so it’s not worth it. The marriage may be ending, but you’ll still have to live with your credit score.

Divorce Credit Recovery

You’ll need to start establishing credit on your own once your finances are separated from your ex-spouses. Let’s take a look at the steps you should take.

1. Start Small

Take out a credit card with a low limit in your own name. A trusted bank or department store can be a good source for this card.

Make sure to pay your bills on time, no matter what, to keep your credit score great (or work your way up to excellent no matter what you’re at). Pay off your full credit balance each month – just use it for small purchases, so you don’t have to pay interest.

In six months, apply for a second card and keep making the same consistent, small payments. Avoid running up debt as much as possible. You’ll quickly see your credit score rise if you stick to this strategy.

2. Get a Cosigner

If you can’t get approved on your own, find a family member or friend who’s willing to cosign. Keep in mind that your actions with that credit card or loan will show up on your cosigner’s credit profile, so just use it to build your credit carefully. After a while, try to apply on your own again.

3. Try a Secured Card

A secured card uses an existing savings account as security for the line of credit. This can allow people who wouldn’t otherwise be approved to start building credit. However, keep in mind that these cards sometimes have extra fees.

Get Your Finances On Track

In addition to building credit, you need to get your whole financial life in order. Do you have debt after divorce or other financial concerns? Here’s how to get everything under control.

1. Take Inventory

Start by taking a thorough inventory of your financial life.

Create a spreadsheet or use a binder to track your expenses, income, liabilities, and assets. Use one sheet for each of these.

On each sheet, note information about accounts, amounts, and institutions, as well as whose name is on the account. Now, you have a one-stop information shop for everyone going on with your finances. You can update or change it whenever you need.

2. Start a Budget

If you haven’t been keeping a budget, it’s a good time to get started.

Use your inventory to figure out where your income and expenses currently lie. Avoid racking up debt if you can, even though divorce can be costly. Most importantly, start tracking your average spending, so you can find places to cut back or start looking for new income sources you’ll need.

Need More Credit Repair Advice?

Credit recovery after divorce takes time, effort, and patience. However, you can do it if you follow this guide – and in the end, your financial life might be even healthier than it was before.

This beginner’s guide will get you off to a great start. But if you want to know more about your credit repair options, check out our advice here.

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