With divorce and separation come a number of new challenges and responsibilities. Suddenly you are forced to make important financial decisions at a time when you may feel as if your world is crumbling. Though it may be tempting to put off or ignore certain financial obligations, doing so could potentially ruin your chances of being able to open new lines of credit needed to help you build a stable future for you and your children. However, with the right support and legal guidance, it is possible to protect and restore your credit profile for years to come.
Know What is on your Credit Report
It is critical to know what items are on your credit report. You can request a free copy of your credit report from all three credit reporting agencies without damaging your score. Check for any mistakes that might affect your score. Also, if you have been married for some time, chances are you have forgotten about every account you may have opened with your spouse. Make note of every open account on your credit report and whether it is listed as an individual, joint or authorized user account. Make copies of all financial documents, including credit card statements, and keep them in a safe location or give them to your divorce lawyer.
Manage Shared Accounts
Once you have identified all open credit accounts, it is best to close any that are held jointly. Try to decide if you and your spouse can agree on who will be responsible for what and call your creditors and ask them how to transfer your joint accounts to the person who has agreed to be solely responsible. Be sure that you understand all of the terms of the agreement and whether or not the creditor is releasing you fully from the debt.
During the divorce negotiations, continue making payments on all of your open accounts, even if you only make the minimum payment. Resist the urge to try to hurt your soon-to-be-ex by racking up large amounts of debt or missing payments on accounts. This sort of behavior will always come back to haunt you. Having a high debt-to-income ratio or missing payments can negatively affect your ability to open new credit in your own name for up to seven years.
Talk to a Lawyer
The task of untangling your financial responsibilities from those of your spouse is complicated. If not handled properly, you could wind up with a significant financial burden that you never expected. For this reason, it is important to talk to a qualified divorce lawyer with experience handling complex divorce issues such as division of debt.
Create a Post-divorce Budget
Transitioning from a dual-income household to a single income budget can come as a shock if you are not fully prepared. Take the time to prepare a detailed budget for yourself. The cost of housing should take priority, followed by other obligations such as credit cards, car payments, personal loans and insurance costs. If you find yourself coming up short, consider what can be cut, such as cable, a comprehensive cell phone plan or other luxuries. Remember that these short-term sacrifices can go a long way to rebuilding your financial health in the long-term.
Establish Credit Independently
If you do not already have a personal credit card, now is the time to get one. Having and using an open line of credit is an excellent way to build your credit. However, this is only true if you pay your bill on time every month. It is also important to keep your balance-to-limit ratio low. Experts say that keeping your balance below 30% of your credit limit is the easiest way to improve your score. The best way to do this is to pay your balance in full every month.
When starting a new life, tough choices need to be made. Don’t take on more obligations than you can handle or your credit could suffer. Use your credit cards as a tool to help you restore or build a beneficial credit history, not as a means to purchase items that you cannot afford.
Towson Divorce Lawyers at Huesman, Jones, & Miles, LLC, Help Clients Navigate through the Finances of Divorce
Towson Divorce Lawyers at Huesman, Jones, & Miles, LLC help clients going through divorce get their lives back together as seamlessly as possible. Our lawyers are experienced in family law and will assist in fair equitable distribution. Call 443-589-0150 or contact us online to schedule a free consultation.