Getting Your Credit in Order before a Divorce

 Posted on December 06, 2016 in Property Division

Purchasing items with credit is a common practice today and one to which many people have become accustomed. According to USA Today, the average American household carries almost $16,000 of credit card debt at any given time. This reliance on credit means those who are considering a divorce should take extra care to ensure that they have their credit in order. This is especially true for people who have stopped working to care for the home while their spouse has continued to draw a paycheck. One of the most contentious issues in many divorces is actually the division of debt--not assets. Finances are often tight for each partner after a divorce, and matters are made even more challenging when the new beginning comes with a large debt burden.

Here are some tips to help you get your credit on solid footing:

Check Your Credit Score

Your credit score impacts the ease with which you open new credit cards and take out loans, and it also affects the terms of those deals, such as the size of interest rates. Your spouse's debts and your joint credit cards may have an effect on your credit score. If they have been accumulating new debts in your name without your knowledge, this practice could seriously harm your credit. Checking your credit score can give you a fuller understanding for what debts exist, and where you and your spouse stand on them. It can also alert you to any mistakes that the credit reporting agency might have made, which will allow you to take the necessary steps to resolve this.

Establish Your Own Credit

Many people can have trouble with their credit after a divorce because large portions of their credit were in their spouse’s name. This can leave them with a gap in their credit history that makes it more difficult to get loans and credit cards. This means that taking out a credit card in your own name is an important early step to take. Depending on the quality of your credit history, this step may entail getting a “secured” credit card. Secured cards are cards with which the person’s credit limit is “secured” by cash that they place into a special bank account, meaning that the bank can take the money if the cardholder defaults on their payments. However, defaulting should not be an issue if all you want to do is establish a better credit history. Simply run up small balances every month and ensure that you pay them off. This can increase your credit score by demonstrating responsibility.

If you are making preparations to file for divorce, or if your spouse has recently filed their divorce papers, reach out to a Kane County divorce attorney today. We can help you examine your options and guide you through this difficult time. Call 630-584-4800 for a free, confidential consultation.

Sources:

http://www.usatoday.com/story/money/personalfinance/2016/10/12/average-credit-card-debt/91431058/