Building your credit after a divorce is extremely important. Your credit score affects what kind of apartment or home you can afford as well as what vehicle you can purchase and much more. If you have a low or no credit score, it will be difficult to even find a place to live after you are separated. So building up your credit during or right after your divorce is key. Open up your accounts and begin putting all of your sole money in there. Pay all of your bills on time every month, and pay off credit cards as well. Work with your ex if there is any joint debt. And finally, set a tight monthly budget and stick to it as closely as possible. Divorce can negatively impact your credit score, so it’s important to know how to build credit back afterward.
Building Your Credit After a Divorce: Recovering Financially
Open Your Own Accounts
Building your credit after divorce begins with you opening up your bank accounts in your name only. You likely already have some joint accounts with your ex, but now is the time to open some that are only in your name. You’ll want to open a savings and checking account. Move all of the money that is yours alone into these accounts. It’s also a good time to go ahead and close any joint accounts. You don’t want your ex running up large debts with your name still attached to the accounts.
Pay Bills on Time
It’s important to pay all of your bills on time when building your credit after a divorce. This also includes new payments like alimony and child support. If you are late on your bills each month, it can negatively impact your credit score. It’s also a good idea to pay off your credit cards in full each month.
Work With Your Ex
While building your credit after a divorce, you might have to deal with some joint debt with your ex. It may be the last thing you want to do to contact your ex, but if you can work together to pay off joint debt quickly, it will help your credit. There are many ways to work on paying off debt, for example, the debt snowball. This is where you pay off your smallest debts first, then use the money that you save from those debts to pay off larger ones. Eventually, you are debt-free.
Set a Monthly Budget
Finally, when building your credit after a divorce, it’s extremely important to set a monthly budget. It’s best to set a very tight budget and live as modestly as possible for a little while. This will ensure that you have plenty of money to pay off any debts and pay off credit card bills every month. If you have plenty of money in savings, an unexpected expense isn’t the emergency it might be if you weren’t budgeting well.
Building your credit after a divorce can take a while, so it’s important to start as soon as possible. Some people think it’s wise to go ahead and open up a credit card or bank account before they even begin the divorce process so that they can start establishing credit on their own. Always pay your bills on time each month, including any new payments like alimony or child support. Work with your ex to try and pay off joint debts as quickly as possible to help both of your credit scores. And finally, budget budget budget. Living frugally will allow you to put away some savings so that unexpected expenses don’t end up hurting your credit score by going to collections. Helpfully, you’ll be able to bounce back financially from divorce and build up your credit quickly.