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Repairing Your Credit After a Divorce
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By: XSTILLA.COM
The absolute best time to protect your credit rating for the future is right before you are divorced. However, in the majority of cases, that's not a possibility, leaving many with the task of repairing their credit after the divorce is final. Luckily, there are several ways to restore your good name, even if you're left with a mountain of debt.
Know Your Credit Report
The first and perhaps most important step toward repairing your credit after a divorce is to take measures to ensure that no further damage is done. Obtain copies of your own credit report from all three major credit bureaus, which are TransUnion, Equifax, and Experian. In the US, under the Fair Credit Reporting Act (FCRA), you are entitled to a free copy from all three bureaus, upon your request, once every 12 months, either all at the same time, or separately. By staggering your requests over the course of the year, you're able to keep a close eye on your credit, without the need to pay for the reports.
Many people are surprised to learn that their credit report contains many different types of information, such as how your bills are paid, where you live, whether or not you've ever been arrested or sued, and of course, if you've ever filed for bankruptcy. Go over your report with a fine-toothed comb, note if there are any discrepancies or inaccuracies that need attention, and anything else that stands out, such as late payments and high unpaid balances.
You'll want to make certain that all joint or co-signed accounts held with your former spouse are either completely closed or refinanced. If your spouse is making late payments, or not making them at all, you certainly don't want that to continue to affect your credit.
The Benefits of Secured Credit Cards
Either through your own bank or any of the major credit card companies, open a secured credit card as soon as you are able. By depositing a small amount of money, even as low as $250, you'll be able to eventually rebuild your credit rating by using the card, and then making sure to remit all payments on time.
Also, an online search will provide plenty of information about the numerous companies who offer secured cards to those with bad or no credit. Make sure the card you choose is issued by a reputable company, and that you know all of the terms and conditions of the account before agreeing to anything.
Reestablish Yourself
Unfortunately, many newly divorced people find themselves facing a dire financial future, often times through no fault of their own. While the damage to your credit is reversible, it definitely can be a frustrating, as well as an ongoing, lengthy process.
Besides secured credit cards, try applying for credit for a department store or gas card, or one with an extra low balance. You might be asking yourself why you'd want to incur new debt while trying to recover from the old, but realize that this is the only way to prove yourself to be creditworthy again.
Religiously make payments on time, paying a little extra on the balance if possible, even if it's just a few dollars, and be careful not to open too many accounts at once. Wait for about six months after making all payments on time before applying for another line of credit.
Ideally, you'll eventually want to strive for a credit score of over 650 if you want to qualify for most standard loans such as mortgages or auto loans.
Debt Management
Meeting with a consumer credit counselor or debt management consultant, even for a fee, is often times well worth the cost of the professional advice and guidance you'll receive about restoring or repairing your credit after a divorce. Besides helping you to set a reasonable budget and make a concrete financial plan for the future, they may also be able to negotiate with all of your creditors to work out viable arrangements for repayment.
