Divorce can be one of the most stressful events in a person's life, on a par with losing a job, or the death of a family member. One of the more stressful elements of divorce is trying to sort out money issues and start over financially as a single person rather than as part of a married couple. Illinois residents facing divorce should be aware of their credit scores as they begin life after divorce and how to build or maintain good credit.
Why Credit Score Matters
People need to know their credit scores as credit scores impact so many parts of their lives. There are three national credit reporting agencies, Experian, Trans Union and Equifax Credit Information Services. Every time a person applies for any type of credit - home mortgage, credit card, auto loan, apartment lease or even phone installation - the institution will check the applicant's credit rating. Individuals with lower credit scores usually end up paying higher interest rates for credit or they are denied credit altogether.
Tips for Building Credit
Some people find that they are starting at a disadvantage after divorce because of financial decisions their spouses made, such as opening accounts in both parties' names and then failing to pay the bills. Others face challenges because they did not work while married, so they have no income to report as their own. However, people going through divorce can take steps to build credit as individuals rather than as part of a married couple:
- Examine credit reports: People should know what creditors are seeing by examining their own credit report which gives the individual an opportunity to correct errors, as well as spot any accounts of which they are unaware.
- Obtain employment: The person who did not work while married should take immediate steps to secure employment, so potential creditors view them as less of a credit risk.
- Evaluate joint accounts: People should consider closing joint accounts. Similarly, credit cards upon which a spouse is an authorized signer should be re-evaluated because their spouse's actions can potentially influence their own credit rating.
- Consider a secured credit card: A person who has trouble obtaining a credit card may want to consider a secured credit card to build a positive credit history.
- Maintain a good history of timely installment payments: Making timely installment payments on your mortgage, car and credit cards will enhance your credit score.
- Use credit cards in moderation: Avoid using all of your available credit on credit cards. Even if you pay your balance in full each month, using a significant amount of your credit line each month can reduce your credit score
Divorce, and all the changes that it causes, can be stressful. However, seeking the guidance of an experienced family law attorney can help alleviate some of your anxiety. Contact the Law Offices of Alexandra M. Goddard today if you are considering divorce and, more importantly, before taking any of the actions listed above.
