Personal credit should always be reviewed prior to divorce to allow time to build it or improve it. Strong credit is necessary post-divorce to rent a home, qualify for a mortgage or to buy/lease a car, therefore it is important to know where you stand and establish a plan.
The first step in addressing credit after divorce is to obtain a copy of your credit report from each of the three agencies (Equifax, Experian, TransUnion) to review your current credit history. In addition, be sure to obtain your current credit score. Each credit agency is required by law to provide one free copy of your credit report each year. Review the credit report to understand what credit is in your name, to see the outstanding balances on your existing credit, to identify any derogatory items and to ensure everything looks correct. By requesting a free credit report from each different agency every 4 months you can easily and efficiently monitor your personal credit on an annual basis.
It is also important to know whether you are a joint account holder (considers both individual’s credit histories) on the card, an authorized user (only considers the primary owner’s credit history) or whether you are the sole account holder.
Any discrepancies (i.e., unauthorized cards, incorrect outstanding balances, etc.) need to be addressed by contacting the credit bureau directly. This may require additional supporting documentation to rectify the issue.
Be sure to remove your ex-spouse from any accounts in your name where they are listed as an authorized user. If the accounts were jointly held, the account should be closed since both parties are legally responsible for the debt repayment. If you do not have a credit card in your name yet be sure to do so before closing any joint accounts.
Depending on your personal financial situation, consider applying for a new credit card to begin building additional credit history. If you currently have no credit history and are unable to obtain new credit, start with a secured credit card. Secured credit cards require a refundable security deposit in exchange for a credit line and help build a reliable credit history over time.
The only way to improve your credit score is to use your credit responsibly and make all payments timely. Increasing your score takes time – there is no quick fix.
Looking for assistance with your personal situation? Contact Mariella Foley, a Certified Divorce Financial Analyst to assist in your pre-divorce and post-divorce planning. Mariella is a Partner and Wealth Advisor with Round Table Wealth Management in Westfield.