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Top 5 Ways to Rebuild Your Credit After Divorce

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Top 5 Ways to Rebuild Your Credit After Divorce

Do you think rebuilding your credit after divorce is a challenging task? Divorce may result in major credit issues, like missed and late payments, increased monthly payments, and high credit card balances.

There are many financial issues that could lead to divorce, and after a divorce, these issues may include selling your house or getting held responsible for an expensive lease. When you file for a divorce, it may also include the attorney’s expenses and the legal fees.

After a divorce, rebuilding your credit takes years to reach a viable point. Rebuilding your credit after divorce will not happen overnight, but if you are good at handling your finances properly, you may achieve the best credit score.

This article covers how to rebuild your credit after divorce.

5 Ways to Rebuild Your Credit After Divorce

So, you must follow these steps to rebuild your credit after divorce. It is not possible for everyone to come out of a divorce with good credit.

1. Create and Stick to a Budget

You must create a budget plan for your monthly payments without your spouse’s help.

Building and rebuilding credit is about making your payments on time and reducing your debt. You must plan a budget from the current income and any alimony you receive. When you feel that the income and the alimony are too low, then you should get another job.

If you feel you are not capable of handling money because your spouse would have handled them, Then it will take some time in making a budget and sticking to that.

This is the first step in rebuilding your credit after divorce, and you must have some grasp of money management or seek the help of someone who is, like an accountant, CPA, or trusted family member.

2. Always Keep an Eye on Your Credit Score

Knowing your credit score is a good credit habit, and the best way to know your credit score is to get your free credit report from any one of the three credit bureaus.

Check your credit score in the credit reports and check whether your score is lowering or rising. Pay attention to where it is going down and work on it accordingly.

Your credit reports show your credit history and whether you opened any joint accounts with your spouse.

In case of any inaccuracies, you can start to fix them. When you need any help in raising accuracy, you may contact a legitimate credit repair service.

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3. Close all the Joint Accounts

Many new financial responsibilities begin during the divorce, but your credit reports will not have those changes. It will still show joint accounts as they are when they were made.

The joint accounts you may have with your spouse must be handled immediately because the starting stage of the divorce will hurt your credit score because your available credit is low. Once you start closing them, your credit score will improve. 

If you still have open accounts with your spouse, then you will never have control of your credit score. Any changes that your spouse makes will affect your credit score so long as your name is on the account, so it is better to have a divorce settlement for separating the debt.

The debts must be separated in a particular name, which may be either in your name or in your spouse’s name. To close a joint account, have a written request to the credit bureaus stating to close your account or remove your name from that account and submit proper documentation to the credit bureaus.

4. Want to get a New Credit- Then change your last name

When you are planning to get new credit after your divorce, you must change your last name or remove it. Once you do, you must also contact your creditors for the name change on your accounts.

Once your name is changed, your new accounts will be in the new name. A change of name will not affect your credit score because your accounts are based on your social security number. The name change will be included in your credit report to maintain consistency.

You can also get a secured credit card so that you become more responsible in making payments. By using secured credit cards, your responsibility will increase and you will feel more consistent in managing money.

5. Always make payments on time

It may seem obvious, but if you do not make payments on time, then your credit score will suffer. However, there are several factors to consider about making payments during and after the divorce proceedings and doing so on time.

When your spouse makes any late payments or missed payments, then your credit score will go down if it is a joint credit account.

You will deal with many financial problems if your spouse does not pay your debts back and you must be sure of your payments, whether they are paid on time or not.

When you want to maintain your credit report, always have a habit of making payments on time and You must have your debts on your record. If you want to protect your credit, then it will be good if you stay organized on your bills.

When you want to have an excellent credit record with your own debts, you must dispute a divorce issue on your credit score.

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Rebuilding your credit after divorce is a challenging task, so you must have a proper credit habit for rebuilding and maintaining your credit.

You can also go for a secured credit card so that you will become more responsible in making payments. By using secured credit cards your responsibility will increase and you will feel more consistent in managing money.

Rebuilding credit will take time and you will learn how to manage your money better. You will also feel satisfied with a small increase in your credit score over time and enjoy your financial freedom after a divorce. Contact us to know more about your credit report and history.

Frequently Asked Questions

Does your credit score go down after divorce?

Divorce will not directly affect your credit score or your credit report. During the divorce process, you will be splitting up the joint accounts and the debts, which affects your credit score.

Is it better to pay off debt before divorce?

In the case of a joint account, you would ideally clear your debts before the divorce. You need to clear your debts because after the divorce, you will split your joint account and it will show an impact on your credit scores.

Is a car an asset for divorce?

Yes, your car is an important asset in your divorce. After your divorce, whoever bought the car will own it. Generally, the vehicles are divided based on the state you reside in. 

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