How to Build Credit after Divorce

credit recovery after divorce

In and of itself, divorce does not directly impact credit, however….Your credit can be damaged as a result of divorce. The good news is that it doesn’t need to be that way. You can take steps to prevent future credit issues and build your credit after divorce.

During the Divorce Process

During the divorce process you and your spouse are liable for debts, even those incurred as a couple. That means, regardless of who you think is responsible, your creditors still need to be paid.

TIP: Pay the debts even if it’s just minimums on credit cards. Keep track of what you pay. In some cases, you can sue your spouse for the amount they owed on the debt.

The Divorce Decree is Done – What Does It Mean to Creditors?

Unfortunately, nothing… Legally a creditor can attempt to collect debt from whomever is a signer (not authorized user) on the account, regardless of what the divorce decree states. They just want their money. If an account is joint, but one spouse (say husband) is supposed to be responsible for payment and FAILS, the bank can still pursue, even sue, the other spouse (wife). The only recourse the wife has is to make a settlement with that creditor and then sue the husband under breach of the divorce decree to recover her loss. It’s a difficult scenario that many divorce attorneys don’t properly advise their clients. We have many clients who were divorced years ago and have a foreclosure or charge off suddenly pop up on their report because their ex-spouse just now defaulted.

TIP: Make sure that your divorce attorney reviews each debt, helps you assess potential scenarios and pushes for real solutions.

Update Accounts

Before or after you receive the divorce decree, update all accounts that you possibly can, so ONLY the correct responsible party is on the account. For example, you may have to refinance the house into your name only or close the joint checking account. If this can be completed for every debt, you will not have any credit issues solely due to “divorce”. Financial debts will have been split along responsible party lines.  Sometimes updating accounts is impossible because the ‘responsible party’ cannot qualify for a refinance on their own. A good attorney should help solve these issues and may need to change allocation of debts or look at other options like debt settlement or bankruptcy.

TIP: Update every joint account according to the responsible party in the decree.

Rebuild Your Credit

As with any plan to rebuild your credit, you must stay current on your payments. Look at your income and expenses and determine if/where you need to cut expenses. Maybe you need to get a roommate or sell your house and move to a more affordable home. You may need to get an extra job to pay debt. Do what you need to do to stay current and pay old debts.

TIP: Get a secured credit card or credit builder savings account. Payments on these accounts are sent to credit reporting agencies and help to re-establish your credit. We can help point you to the best options.

It’s not easy to rebuild your credit and move forward from a divorce, but it can be done. If you need help or have questions about items on your credit report, please make an appointment with Go Clean Credit today.

Leave a Reply

Your email address will not be published. Required fields are marked *