Very frequently, when a client comes in to see us for consultation about divorce, the family has incurred substantial debt. Often, there are very large balances on credit cards. This situation has evolved because perhaps family finances caused some of the stress in the marriage; or one spouse was not being financially responsible.
Those financial pressures sometimes increase during the divorce process. Each party retains an attorney and attorney’s fees are incurred. In addition, the couple may now be living in two residences, increasing their expenses. As a result, financial pressures can actually multiple during the divorce process.
Proper use of credit is a critical skill for each spouse to develop as they remove themselves from the marriage. A good first step is to obtain a copy of and review a good credit report. Your credit report is based on a number of factors, including payment history, the amount owed and how much credit is used, the number of recently requested credit reports, and the types of each credit used. If both you and your spouse are listed on an account or credit card, the payment history for that joint account will affect the credit score of both individuals, as long as your name is associated with that account.
If you check your credit report and ascertain errors in it, you have the right to have those errors corrected if you do so quickly. Reviewing an accurate credit report will let you know what your credit score is. That credit score is used by various lenders in the decision to extend credit; but it is also used by insurance companies, respective employers, and apartment managers.
Once you and your spouse separate, you should protect your credit. During and after the divorce process, joint credit should not be used, so that your credit is not damaged by any financial irresponsibility by your former spouse. All joint accounts and credit cards should be closed.
The next step is to establish your own credit. You should open up your own bank or investment account. A secured loan is a fast and easy way to establish an independent credit history. If your circumstances warrant it, you may apply for a credit card or a store account in your own name, and then make payments as and when due on that card.
It requires some efforts to do so, but it is very important that a person emerging from a divorce take the steps necessary to develop a solid, favorable independent credit rating.