Tips on Rebuilding Your Credit After Divorce

February 20th, 2023

Tips on Rebuilding Your Credit After Divorce

Rebuilding your credit after divorce might be necessary if you are taking on more financial burdens and are struggling to keep up with payments. In addition, if your ex-spouse is still using joint accounts to wrack up debt, it can also lower your score. While divorce itself doesn’t affect your credit score, the changes in your financial situation can. Figure out your starting point by checking your credit score online and looking at all of your financials. If you have always shared cards with your spouse, you might need to establish your own credit history. Make a budget that takes into account all of your monthly income and debts. And finally, establish some healthy spending habits to slowly raise up your credit score. Hopefully, you’ll be able to get your finances well under control, begin saving, and rebuild your credit score quickly.

Know Your Starting Point

You won’t know whether rebuilding your credit after divorce is even necessary unless you know your current credit score. Most major banks and financial institutions can easily give you your credit score, or you can check it online. In general, you’d like to shoot for a credit score above 700, although anything above 800 is considered excellent credit. It’s also important to review the rest of your finances. For example, see if you have any joint credit cards with your ex. If so, you’ll want to work out a plan to quickly pay those off and cancel them so that your ex can’t continue building debt in your name.

Establish Your Own Credit History

If you have always shared credit cards with your family or ex-spouse, then your concern might not be rebuilding credit after divorce but rather establishing your own credit history. The easiest way to do this is to open a credit card in your name and begin using it and paying it off each month. If you have trouble getting your own credit card, you can try a secured credit card instead, which requires a down payment up front. Finally, you can also make sure that your landlord is reporting your on-time rent payments to the credit bureaus which can help establish your credit history.

Make A Budget

One important rule for rebuilding your credit after divorce is to stick to a budget. In order to do this, you’ll need to know exactly how much money is coming in and going out each month. Create a list of all of your income as well as recurring payments like utilities, card payments, any child or spousal support, and expenses. Don’t forget to include monthly subscription services as well as things like occasional food deliveries. Try to stick to as tight of a budget as you can, and let go of any monthly debts that you are able to live without.

Practice Healthy Spending Habits

Finally, rebuilding your credit after divorce relies on you establishing some healthy spending habits and sticking to them. One way to do this is to pay off your credit cards in full every month. Simply paying the minimum requirement still leaves you building interest on them. In addition, be conscious of what your credit limit is on each of your cards and try to stay well below that number. Ideally, you’d like to use less than 10% but even keeping it below 30% will help your credit score.

While a divorce itself doesn’t lower your credit score in any way, it can still leave your finances in a very different place. And unfortunately, if bills start to pile up, it can end up lowering your credit score. Rebuilding credit after divorce is possible as long as you are consistent and patient. Learn what your current credit score is so you know where you’re starting from. If you don’t already have your own credit history, try to begin building credit by opening a credit card in your name. Establish a tight budget and try to stick to it as closely as possible. Finally, practice healthy spending habits like staying well below your credit limit on cards and paying them off each month. If you stick to these guidelines, you should see your credit score begin rising. Hopefully, you’ll be able to establish some healthy financial habits that allow you to build your credit and increase your savings.