How to Rebuild Your Credit After Divorce

Highlights:

• Filing for divorce won't directly affect your credit, but you could see an indirect effect depending on how you divide any finances you share with your former spouse.
• As you begin the process of filing for divorce, it's important to keep careful track of any shared credit accounts and understand whose name is listed on each.
• Rebuilding your credit after divorce takes time and persistence. Be patient throughout the process.

Divorce is a stressful and often complicated process that can affect many areas of your financial life. And, as you untangle your finances from those of your former spouse, it's not uncommon to find that your credit score has taken a hit during the process.

Luckily, there are steps you can take to rebuild your credit after divorce, but it's important to understand how your finances may have changed now that you're no longer part of a married couple.

Does divorce lower your credit scores?

Keep in mind that you actually have multiple credit scores, and they may vary depending on the source.

Simply filing for divorce won't directly impact your credit scores. However, that doesn't mean your scores won't be affected throughout the process. There are several situations where divorce could impact your credit scores depending on how you and your ex-spouse managed joint finances throughout the marriage.

For example, if you and your ex-spouse shared joint credit accounts and those accounts weren't paid as agreed, your credit scores could suffer. This is true even if you paid your accounts as required but your spouse did not. If your former partner's name is also on an active account, you may remain liable for their past and future failure to pay. Likewise, if you've benefited from being an authorized user on your ex-spouse's credit card, being removed could negatively impact your credit history, even if the rest of your financial habits have stayed the same.

How can I rebuild my credit scores after divorce?

If you find that your credit scores have been negatively affected by the divorce process, don't panic. These strategies can help you get back on track.

1. Get familiar with your credit scores and credit reports.
Keep an eye on your credit scores, credit reports and other aspects of your credit history throughout the divorce process. Your credit scores are calculated based on the information included in your credit reports, so it's important to ensure they are accurate and complete.

For a free monthly VantageScore 3.0 credit score, create a myEquifax account and click "Get my free credit score" on your myEquifax dashboard to enroll in Equifax Core Credit^™. A VantageScore is one of many types of credit scores. You can also get free credit reports annually from the three nationwide consumer reporting agencies (Equifax, TransUnion and Experian) at AnnualCreditReport.com.

2. Cut off joint accounts that you share with your ex.
Separating your finances can be one of the trickiest parts of a divorce, but it's often one of the most vital. If you and your partner share joint credit accounts, your divorce process will likely include determining who holds ultimate responsibility for each debt.

If you're able, work with your former partner to develop a repayment plan for all shared accounts so that they can be easily closed. If that approach doesn't work, contact your creditor or lender to convert each joint account into one that's individually owned. It's important to remove your former partner from any debts that are also in your name. Otherwise, you could find yourself responsible for missed payments or other negative credit behavior that they display on shared accounts.

3. Establish your own credit history, independently of your ex-spouse.
You may have built your own credit history long before you got married. If you haven't, or if most of your financial life was shared with your ex-spouse, it's important to establish a credit history now that you're single.

Opening a credit card and paying it off each month can be one of the best ways to build credit over time. If you find yourself struggling to be approved for a new credit account without your spouse's credit history, consider a secured credit card. With a secured credit card, high-risk borrowers can obtain a credit card by paying a deposit up front (usually the same amount as the card's credit limit). A secured account can be a great stepping-stone to help you build credit. Just be aware that this type of credit card isn't intended for long-term use. It's also important to make sure that your secured credit card company reports your information to the three nationwide consumer reporting agencies.

4. Update your monthly budget to account for your new living situation.
Take the time to revise your monthly budget to account for any changes in your income and expenses now that you and your spouse are no longer together. Having a clear picture of your post-divorce budget will make it easier to determine what you can afford to pay toward any remaining debts.

5. Pay your debts on time every month.
As you rebuild your financial life following a divorce, it's important to make sure your bills are paid on time, for both your individual accounts and any you hold jointly with your former spouse. This can include paying off anything from mortgages and car loans to utility and medical bills — in other words, all expenses that you previously shared with your ex-spouse.

It's important to make at least the minimum required debt payments on time every month — and even better to pay your monthly balances in full. Showing a consistent history of timely payments is one of the best ways to build a positive credit history.

6. Keep an eye on your credit utilization rate.
Your credit utilization rate, also known as your debt-to-credit ratio, represents the amount of revolving credit you're using divided by the total amount of credit available to you. It's usually expressed as a percentage. Your credit utilization rate is one of the factors some lenders consider when evaluating your creditworthiness. In general, lenders like to see a credit utilization rate of no more than 30%.

It's important to keep your credit utilization rate in mind when closing any previously shared accounts. Getting rid of a joint account may drop the total amount of credit available to you and increase your utilization rate, even if your spending behavior hasn't changed.

7. Be patient. Remember: Rebuilding your credit after divorce takes time and persistence. As you work to reestablish your credit history, be patient with yourself and your situation. Try to make responsible and consistent decisions about your credit, so you can enter the next chapter of your life in good financial shape.