Divorce can wreak havoc in your financial life, leaving you with bad credit and a low credit score. Fortunately, there are ways to protect yourself and even improve your credit after divorce.
Here are seven steps:
1. Pay Your Bills on Time
The most important thing you can do to improve your credit is to pay all of your bills on time. Set up a paper filing system or use an electronic bill payment system to keep track of your accounts, how much you owe and when each payment is due each month. If you can't pay on time, be proactive: call the company and ask for an extension.
2. Close Your Joint Credit Card and Bank Accounts
Closing credit accounts might hurt your credit score in the short term, but it's worth taking the temporary hit to make sure your ex can't run up debts in your name and refuse to pay them. Joint bank accounts should be closed to prevent excessive overdrafts by your ex, which could make it difficult for you to open a separate account in the future.
3. Review Your Credit Reports
The AnnualCreditReport.com website allows you to get a free copy of each of your three credit bureau reports from Equifax, Experian and TransUnion at least once each year. Read your reports carefully. If you find any errors, contact the credit bureau and dispute them. If your spouse opened accounts in your name without your knowledge, close them. You can view your credit score for free right here on LendingTree.
4. Open New Accounts in Your Name Only
A rush to get a lot of new credit cards or other loans all at once can damage your credit score, so you should take a measured approach to this step. Apply for one or two credit cards and one new bank account to start. You can apply for more credit later, after you've established your own good credit history, if that's appropriate for you.
5. Consider a Secured Credit Card
If your credit is damaged or you don't have any credit in your own name, apply for a secured credit card. You'll have to set aside some money to secure the card, but this type of credit can help you build or repair your own credit history.
6. Create a Monthly Budget
Living on a budget is a smart way to empower yourself to understand your financial situation and make the best decisions you can about how you spend your money. With a budget, you won't be caught short when it's time to pay your bills – on time – to protect your credit. If you have debts, try to pay more than the minimum each month or whenever you can.
7. Don't Obsess About Your Credit
Rebooting your financial life isn't fast or easy, but you can improve your credit after divorce if you create a track record of using credit responsibly. Rather than becoming obsessed about your credit or personal finances, educate yourself, set up systems and let those systems carry you forward as you move on with your new life.