Getting a fresh start on your credit after a divorce is not easy!
As with everything else that you must divide when you divorce, you must also work to separate your credit files from those of your ex-spouse. This can mean selling or refinancing your home, your vehicles, renegotiating personal loans, and even requalifying for your credit card accounts.
Why is it important to separate your credit files?
While it may not seem to be that important to separate your credit from that of your former spouse, it’s actually one of the most prudent things to do in the event of a divorce, for many reasons:
- If your divorce is particularly nasty, your former spouse could do serious damage to your credit rating simply by not paying any bills that are in both your names. As long as your name is on any joint account, regardless of what the divorce decree says, your credit can and will be impacted.
- Failing to separate your credit from that of your former spouse can limit your ability to secure the credit you need. Want to buy a house or a new car? If your name is still on the old mortgage, it’s highly unlikely a lender will approve you for a new mortgage. The same goes for that new car that you need to replace the old one.
- Even if your divorce is completely amicable, your former spouse could lose his (or her) job, or have any number of other serious financial setbacks, and you could be responsible for any of the accounts that are still jointly held. That could mean you would either have to pay the bill or suffer the same consequences as he (or she) when the bill is not paid.
- At some point in the future, one or both of you may remarry, and as such, your credit may become entangled (and impacted) by that future spouse. What if he (or she) marries someone who is not as financially responsible as you are? And what if that person is given access to the credit cards and other accounts that are still jointly held? I’m sure you can already see the problems that you may have.
- And lastly, you need to separate your credit from that of your former spouse so that you have the ability to buy things in the future. If your credit stays tied to that of another individual, it can be extremely hard to buy a car, a house, or even open a credit card if you haven’t established credit in your own name first.
How do you establish credit in your name only?
Before your divorce, chances are you lived in a two income household, and more than likely, your credit cards were in either one or both of your names. It’s also very likely that you and your spouse had a much higher credit limit than you will now that you are a single person with a single income. Now that you’re trying to establish your own credit, you may have to look at a different category of credit cards, or you may even have to start from scratch!
Fortunately, if you do have to start from scratch you do have options. But, first and foremost, before you consider ANY of your options, you will need to find out what your personal credit score is, what’s on your credit report, and what, if anything, you need to have removed, disputed, etc. Now, there are a lot of places that promise you free credit scores, free credit reports, and even free credit monitoring, but if you’re seriously interested in building your own credit, then you’ll want to consider Credit Sesame. They’ll give you your credit score for free, but I would strongly recommend signing up for their credit monitoring as soon as you can so that you can see your credit score, credit report, etc., whenever you want. This makes it far easier to separate and/or clean up your personal credit report after the divorce.
Once you’ve cleaned up your credit report, then you’re ready to start looking at credit cards. All too often, when there’s a divorce, there are also lots of outstanding bills that have to be paid, some even late, and this can and will lower your credit score, making it hard to start building your own credit.
How do you build your own credit?
One of the best ways to build your own personal credit is to get some type of credit in your own name. Typically, you’d want a car loan, credit card, or even just a catalog credit card to start. Then, once you’ve established that line of credit and demonstrated that you can and will use it responsibly, you can (and should) set up at least one more line of credit.
Now, obviously if you can qualify for a car loan on your own, your credit is probably in good enough shape that you won’t necessarily need to get another credit card or setup a catalog credit account, but most of us are simply not that lucky when it comes to separating our finances from those of our former spouses, and we usually have to consider all of our options in order to get that fresh start that we so desperately need.
And that’s where the catalog credit account can be the most beneficial – unlike automobile loans and unsecured credit card accounts, catalog credit card accounts are typically MUCH easier to qualify for, so your acceptance is almost guaranteed. All you have to do is simply fill out a short questionnaire and you’ll get an instant decision. Most people start with at least a $300 credit limit, and it’s fairly common to see credit line increases within the first year of opening your new account.
Even better, in the rare event that you don’t qualify, some catalog shopping sites, (like Fingerhut Credit) have special FreshStart programs that will get you started on improving your credit today!
Here’s what you can expect with Fingerhut: