August 27th, 2010
How to Protect Your Credit After Divorce
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**Today’s guest blog is by Scott Morgan, an Austin Divorce Lawyer who is Board Certified in family law. In his practice he frequently deals with credit repair issues arising in divorce cases.**.
The end of a marriage is often associated with heartbreak and emotional upheaval, but your former soulmate could also be walking away with half of your assets and leave you in a bad credit situation.
However, there are many ways to protect and improve your credit health after a divorce, several of which require little effort but help significantly. Here are a few tips to help you improve your credit health after divorce:
Review Your Credit Report
The first step to improving your credit health is to get a copy of your credit report (you can get a free copy at AnnualCreditReport.com) and find out your credit score (free at Credit Karma) and thoroughly review the report. You want to ensure that your ex’s debts are not showing up on your credit report. If any do, you should contact the creditor to have your name removed from the account so that the debt comes off of your credit report.
Cancel All Joint Cards and Accounts
The last thing you want after your divorce is for your ex-partner to go on a shopping spree with a credit card in your name. Therefore, make sure you cancel all joint credit card accounts after making sure that everything is paid off and cleared. While closing your account can lower your credit score it is a worthwhile tradeoff. You want your credit and your ex’s credit to be as separated as possible.
Apply for a Low Limit Credit Card
If you don’t have any credit in your name because you shared most cards and loans with your spouse, apply for a credit card with a low limit. The low limit will help you avoid temptation to spend money you don’t have, while helping you improve your credit health. Begin by purchasing low cost items throughout the month and pay your balance in full and on-time at the end of each month to build good credit history.
Open a Checking Account in Your Name
Opening a checking account solely in your name is a smart decision to make while you are going through a divorce. You need an account to hold funds that your spouse does not have access to, plus it can also help you protect your credit by ensuring that you have funds available to make at least the minimum payments on credit card and other debts held in your name.
Make Timely Payments on Your Accounts
This might seem obvious, but many people forget how important it is to make your payments on time. A “slow pay” credit history (one where the payor habitually fails to pay the creditor on time) can dramatically lower your credit score. When you receive a bill, have a system in place to remind you to pay it by the due date.
If Necessary, Consider Bankruptcy
If you are so deep in debt after your divorce that you cannot keep up with monthly bill payments, then you may need to consult with a bankruptcy attorney. While bankruptcy is extremely damaging to your credit in the short-term, it can be used to deal with being the situation of being so far in debt that it will be nearly impossible to recover from. Once you have had your slate wiped clean after bankruptcy, you can work on improving your credit health and avoiding the problems that created the excessive debt you had in the first place.
While a divorce has the potential to significantly damage your credit, it is possible to emerge from a divorce with your credit rating intact. By following these suggestions, you will be on-track to improving your credit health after your divorce.