How to Establish Credit After Divorce

Divorce and separations can leave you feeling bewildered, a little disoriented, but are a great time to turn your life around and start anew. After your legal documents and issues are resolved and mediated, it’s up to you to take charge of your credit and financial matters. Depending on the situation, your divorce may have left you without a job, home, or personal assets. Your credit after divorce may be a tumultous arena, but it is essential that you take the opportunity to reorganize and rebuild. You may find yourself without lines of open credit, a strong bank account, or any funds to help you get started. Regardless of the situation, there are still some beneficial steps you can take to establish credit.

Your credit after divorce is important for your future investments; it can open doors for purchasing a home, buying a car, or obtaining a loan for educational or personal purposes. Although ‘too much of a good thing’ applies in credit cards and other financial matters; it’s still important for you to stay ahead and look forward to some long-term goals of stability. Credit after divorce shouldn’t be taken lightly; it can be very valuable to you in the upcoming years.

The key areas of importance to improve your credit after divorce include obtaining reportable employment, finding a place of residence for an extended period of time, opening up at least two credit or debit accounts, and making sure all name changes and addresses are current and up to date.

Creditors are looking for stability and consistency; they will extend credit to applicants who have a strong history of reportable income, verifiable addresses, and long-term commitments to bank and other accounts. Your credit score does play a strong role in how much credit you are able to obtain over a period of time, but the initial offers and benefits will depend largely on your profile and past history.

Bank accounts: If you have had no independent accounts in your name and address for a period of time, this is a great time to get started. Open a debit account in combination with your bank’s checking account, and keep it consistent. Open a savings account, and begin building consistently; even $10 per week will add up as you become busy with other options.

Credit cards: Apply for a credit card in your own name, and check your credit report thoroughly for accuracy and related data. It’s important that your potential creditors are looking at the ‘real’ picture, so make sure your divorcee’s name and information is no longer hanging on your report! Be sure to cancel all credit cards that you jointly carried and avoid the hassle of open credit lines that you do not have access to.

Debit cards: If for some reason you are not able to obtain a credit card, you can attempt to apply for a debit card where you pay a certain amount up front, and can charge against that balance. This helps not only to get you some practice in establishing sensible credit, but also begins your credit account with Visa or Mastercard.

Outstanding debts: You can make arrangements to pay down any debts incurred from the marriage or legal proceedings. Local credit-counseling services can help, but be warned that there are many ‘illegietmate’ companies out there too; make sure to research each company thoroughly and read all fine print.

Bills: Make sure to keep up with all bill payments, even if they are just minimum payments. Past due balances and notes going to collection agencies will debilitate you greatly, and will create ‘marks’ on your credit report.

Learn to Budget: If you have not handled your financials until now, this is an excellent opportunity to learn some basic budgeting skills! Take charge of your monthly expenses by writing everything down, line by line. Do the same with income, and establish your ‘profit’ each month; this exercise will give you a strong idea of what you have available, and what you need to make in order to break even. After that, set some realistic goals to get yourself ahead.

Find references: When needed, make a list of bankers and creditors that you have had good relationships in the past. Use them as a reference for future loans, payment negotiations, and prove creditworthiness when needed.

Living arrangements: Renting is your best option to start with, and you can then proceed in obtaining a home loan for a house purchase. Establish good credit through your landlord, and you can obtain a strong reference from them also.

Even though your divorce may have left you with limited funds, credit, and personal assets, there are still ways to establish credit and prove creditworthiness to potential creditors. If bankruptcy seems to be your only option, consult with a professional bankruptcy attorney first to make sure you haven’t left any options undiscovered. Oftentimes, simply establishing strong and consistent credit will get you ahead and ready to start over!

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