Build Your Credit Score After Divorce

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Divorce is hard enough without having your credit score sink like a well-thrown knuckleball.

Still, there are steps you can take to rejuvenate your score, even if it has dipped in the wake of your marriage.

Divorce rates declined somewhat during the Great Recession (that’s the good news) as more couples hunkered down, trying to hash things out rather than suffer the tough economy on their own. But divorce rates still hover around 17%, according to the National Center for Family and Marriage Research. (For the record, the state with the lowest divorce rate is North Dakota at 14.3% and the highest is Washington, D.C. at 34.5%.

So if the urge to separate is strong, and you’re headed for the rocky financial landscape of divorce, make sure you go in with your eyes wide open. If you don’t, you’re likely to join the millions of newly-divorced who find themselves in greater financial distress than when they were married.

According to a white paper from Safeguard Guaranty, divorce can “be a recipe for financial disaster.” The paper adds that divorce is “the number one common contributing factor for bankruptcy and poverty.”

But it doesn’t have to be that way — or at least that bad. A good analysis of your financial situation before you head into divorce — especially related to the health of your credit rating — can mitigate financial disaster.

Let’s take a look at key ways divorced men and women can protect, and even build, their credit scores after divorce:

Check your credit report. One of the first financial moves you should make after divorce is to check out your credit rating. Better yet, check your rating before you divorce. That will give you a heads up on your current financial picture, including outstanding loan balances, credit card and other debt, as well as any other personal financial “surprises” that might trip you up during divorce.

Open your own accounts. To keep your ex’s credit problems at arm’s length, and give you a fresh start financially, open your own bank account, credit card account, and household utility accounts. This will separate you from your ex’s financial activities, giving you the opportunity to build your own credit. This process entails closing down joint accounts, further separating you from your ex. Do this before you’re divorced, because if you wait too long, you’ll leave yourself open for a black mark or two on your credit report.

Ensure your divorce spells out who owes what. Nobody likes surprises, especially banks and creditors. That’s why it’s so important to mark down in black-and-white which party owes what debt, and when those debts are expected to be paid off. Credit scoring agencies are amenable to divorce documents proving a given debt isn’t yours, but you’ll need the document to prove your case if and when push comes to shove.

Also, be careful about closing down credit cards altogether — that can hurt your credit score. Ask your credit card company to take your name off a given card, and leave that card for your ex-spouse to use, but only in his or her name. Make sure to get a confirmation in writing.

After that, it’s a simple matter of paying all your bills on time.

Divorce is traumatic enough without having your credit score suffer. Take the steps above to make sure your new life is on the path to fiscal happiness, too.

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