By Tracy Achen
It's an unfortunate fact that many women face problems with their credit after divorce. Whether you're struggling to get by on just one income, trying to pay off lingering marital debts, or have never established credit in your own name, it's time to start paying attention to your credit standing.
Building up a good credit score will help you as you rebuild your life. For example, having a good credit score makes it a lot easier when it comes to financing a new car or buying a house. In addition to loan applications, credit scores are often used in processing rental applications, insurance quotes, and even job applications.
The bottom line… the higher your credit score, the easier your life becomes. The following tips can help you get started establishing your credit if you've never done so, or rebuilding your credit as you move forward in life.
The first thing you should do is review your credit report to see what information it contains. The easiest way to get your report from all three credit bureaus is by going to www.annualcreditreport.com. This is the official site that was established to allow people the opportunity to receive a free annual copy of their credit.
Once you get your credit report, review all the information to make sure that everything is listed properly and that none of your ex's information or accounts are showing up. If you find errors, you should contact the credit bureau to have the error corrected (the information on how to do this will come with your credit report). Once the dispute process is completed, you will receive notification from the credit bureau along with an updated copy of your credit report.
You also want to look for any accounts that should have been closed during your divorce that are still showing as open accounts. In this instance, you should contact the creditors to close it, and ask that they report to the credit bureaus that the account was closed at your request. After requesting the change for your account listing, you should wait at least a month or two before ordering another copy of your report to verify that it has been updated correctly.
If you don't have a credit history due to everything being in your ex-husband's name, it's time to establish one. The easiest way to get started is by applying for a credit card. You should check with your local bank to see if they offer credit cards through their institution. You can also apply for a department store credit card to start establishing your credit. Once you get a credit card, the trick is to use it wisely. Instead of going wild and racking up a huge balance, only buy with the card what you would be willing to pay for an item with cash. And then be sure to make regular monthly payments. Low balances and on-time payments are what help build your credit rating.
Since credit scores are determined in part by the mix of credit types, you might also consider getting a small loan from your local bank or savings and loan. If you don't qualify for an unsecured loan, you should be able to get a secured loan by using your savings account as collateral. Your regular on-time payments will help establish your credit worthiness and make future approvals for unsecured loans a lot easier.
While you're working on rebuilding your credit, one of the most important things that you can do is to pay all your bills on time. I know how tight money can get after divorce, and sometimes bills have to be juggled to get them all paid.
To help you decide which bills to pay first, here's a list to help you prioritize your payments:
When you're rebuilding your credit after divorce, you need to exercise restraint in building new debt and work to pay off your existing debts. Your debt ratio (debt owed/total credit available) accounts for 30% of your credit score. And one of the fastest ways to raise your credit scores is by paying down your debts.
Now is not the time to finance a new vehicle or invest in a new wardrobe. Instead of taking on more debt, now is the time to cut corners and put the money you save towards your existing debts. I know that it's not fun, but neither is eating baloney sandwiches because you have to pay for that swank new outfit that you charged on your credit card.
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You can get more tips on making ends meet and rebuilding your credit after divorce below: