We evaluate creditworthiness and identify any areas of improvement. Credit is an essential aspect of personal finance and can affect many other areas of your life. When going through a divorce, your financial situation may change significantly, and you should be aware of the effect this may cause.
It's essential to have a good credit history because it can impact your ability to get loans, rent an apartment, obtain insurance, or even find a job.
We begin by obtaining your credit reports from the three major credit bureaus: Equifax, Experian, and TransUnion. Then we look for any areas of improvement. This may include paying down accounts, submitting releases of paid judgements or consolidation suggestions.
Next, we confirm that there are no new credit inquiries or accounts in your name. We also look to see if there are any joint accounts or authorized signer accounts as those should be scrutinized. If you and your spouse had joint accounts or debts, it's crucial to understand how these will be divided in the divorce settlement. Joint accounts mean both of you are responsible for the debt, and it can affect both your credit scores if payments are missed.
Your Credit Scores are numerical representations of your creditworthiness. The higher your score, the better your credit. A good credit score can help you qualify for loans with favorable terms and lower interest rates.
Several factors influence your credit score:
• Payment History: This is the most critical factor. Make sure to pay your bills on time, especially during the divorce process, to avoid damaging your credit. It is better to make the minimum payment on all accounts, than overpay one and skip another.
• Credit Utilization: Try to keep your credit card balances low compared to your credit limit. High credit card balances can negatively affect your credit score.
• Length of Credit History: The longer you've had credit accounts open, the better it is for your credit score.
• Credit Mix: A diverse mix of credit accounts (e.g., credit cards, loans, mortgages) can positively impact your credit.
• New Credit Inquiries: Applying for new credit accounts can lower your credit score. Once an account is opened, do your best to not close it as that will negatively impact your scores.
If you didn't have individual credit accounts before the divorce, consider opening one or two bank credit cards (Mastercard, Visa, Discover or American Express) in your name. This can help you establish and build your credit history separately from your spouse.
During and after the divorce, it is advisable to regularly monitor your credit. There are free services available.