How Can I Rebuild my Credit After Divorce?
As previously discussed, contested divorces can have the potential to ruin a party’s credit score due to litigation costs, becoming a single income household, and new financial obligations such as child support and maintenance payments. The fear of financial ramifications should never deter someone from filing for divorce or fighting for custody of this children, but keeping their finances in mind throughout the action can help prevent a blow to their credit score. However, if a credit score is negatively impacted, there are plenty of simple ways it can be improved.
Pay bills in a timely fashion.
This should go without saying, but a surefire way to easily rebuild credit is to be diligent when it comes to paying all outstanding bills or debts. This includes utilities such as gas, electric, heat, and internet, as well as mortgage or rent payments, and cell phone and credit card bills. Additionally, payments on loans (be it personal, business, home, or student) should be paid on-time each month to avoid increasingly large interest charges. A lot of companies are willing to work with their borrowers to develop payment plans, or even defer payments for a short period of time. If keeping up with loan payments is a concern, it is best to contact your lender for more information on what payment services they offer.
Address joint debts.
Most marriages involve joint financial accounts, which means both parties will need to address the issue of joint marital debt. Typically, these debts will be assessed, divided, or otherwise dealt with, as part of the equitable distribution phase of divorce. However, there are some instances where one spouse will neglect to meet their financial obligation, even after being ordered to do so by a Judge. In situations such as this, the non-actions of one spouse will negatively affect their ex’s credit score because the debt is still in both names.
Paying off joint debt is essential to rebuilding your credit post-divorce. If your spouse is refusing to cooperate with a court order, your attorney will need to file an enforcement petition with the courts. The divorce lawyers at Brian D. Perskin & Associates, P.C. are well versed in enforcement petitions, and have routine success with them after filing.
Creating a budget post-divorce will guarantee that all other monthly bills and expenses are paid in full and on time. A budget will outline your current monthly or annual income, and you will be able to allocate money accordingly to address household costs and loan payments, as well as child and spousal support obligations (if applicable). Budgets help people visualize where and how their income is spent, which is imperative to rebuilding credit after a divorce.
Utilizing computer programs such as Microsoft Excel, or apps for your smart phone or tablet, will allow you to develop and keep track of your budget while on the go, and eliminate the mess of having loose papers around your home.
Sign up for new credit cards.
Signing up for new credit card accounts is especially sound advice for those who did not have accounts in their name during marriage. Even if your ex-spouse has not fallen behind on paying off their share of the marital debt, it is important to establish your own credit history as a single individual. This will open up more financial doors in the future, and can lead to lower interest rates on loans. Just make sure you only charge what you can afford to pay each month! Paying bills in full and on time is one of the best ways to build your credit.
Work with well-known companies.
In a rush to establish and build their credit, you should avoid opening up credit card accounts with small and unknown companies. While not all lesser known lenders are bad, some will charge application and annual fees, as well as high Annual Percentage Rates (APRs), and fees for paying bills by check, online, or over the phone. Additionally, you may be approved for a smaller credit limit than you had originally thought.
To avoid hidden fees and money hungry lenders, do your research. Focus on some of the more popular banks such as Capital One, TD Bank, Chase, or Bank of America. These institutions tend to offer more of a variety of account options with varying APRs and credit limits, as well as less (or no!) fees. Just as you shopped around for an attorney, you should do the same for your credit card company.
Establishing your own credit as a recent divorcee is crucial to beginning your life as a single person. Even though your credit score may not be important on a day-to-day basis, having a bad one will create headaches further down the road. A negative credit report can prevent you from qualifying for a home loan, and drive up interest rates on other credit accounts. Working to establish financial security is a great and effective winning divorce strategy!
For more information on divorce and family law matters in New York, contact the team at Brian D. Perskin & Associates, P.C. to schedule a free and confidential consultation! With offices centrally located in Brooklyn Heights and Midtown Manhattan, the attorneys are able to meet with prospective clients from all 5 boroughs and Long Island. Don’t hesitate, call 718-875-7584 or 646-791-3228 today!