Karen Ann Ulmer, P.C.
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The 4 Keys to Repairing Credit after Divorce

If your credit has been damaged during your marriage, expect to take some time to repair it. The first step, of course, is to obtain a credit report. You can receive one free report each year from a free report agency, or check with your bank. Assess your situation and then make a plan of action. There are four key steps to repairing your credit: close current joint accounts, restructure your debt, develop a budget, and take positive steps to repair the damage.

Close

The first step is to close all joint accounts. Officially call the companies or banks and close the accounts. Some institutions may require your spouse to also call or sign. Make sure you document your efforts, and if your spouse delays, document that, too. Keep copies of statements in case your spouse decides to go on a wild shopping spree before closing the joint account. In settlement, the judge may award a larger portion of the debt to the spouse if there is clear evidence of an attempt to burden you with more debt.  Obviously, keep official proof that the account has been closed. If your spouse is handling this aspect, make sure you have copies as well.

Restructure

The joint debt remains the responsibility of both of you until it is paid off. Restructuring the debt by transferring a portion of the balance to an account in just your name or refinancing in some other way will separate the expenses - assuming your ex does this as well. If a portion of the debt remains in both your names, you will remain jointly responsible for it, at least until a clear judgment is made by the courts. So try, as much as possible, to get an agreement from your spouse to split the bills.

If you're selling a house, you could use a portion of the sale to pay off any joint debt before distribution of the balance. This will leave a smaller payoff, of course, but will give you both a clean slate with which to start your new lives apart.

If the above options are not possible, try to split the responsibilities evenly, and get it in writing. For instance, if you offer to pay loan A and he or she is to pay loan B, get it in writing. If your ex doesn't pay and the bill collectors come after you, you will have proof of divided responsibility and will be able to go to court for payment enforcement.

Budget

Now that you know how much you have to pay, take a close look at your income and expenses, including repaying debt. Create a budget and stick to it. If you don't have much experience with budgeting, or if it looks like you don't have enough income to cover your necessities, find a trustworthy credit counselor who can help you make good financial changes.

Repair

It's time to open some accounts in your own name. If you changed your name when you married and you want to change it back, do so before opening the new accounts. If your credit is bad, you may need to open a secured card. With a secured card, you put forward a certain amount of money and then you are able to borrow against that money and pay it back at the end of each month. By paying bills on time over a period of months and by not taking out new loans for a while, your credit score will begin to improve. As it improves, you will be able to get a normal credit card, close the secured card, and get your down payment back.

When going through a divorce, it's important to have a team to help you. Besides having moral support, choose trusted advisors for credit, tax, and legal advice. With financial and legal guidance and emotional support, you can get through this and be stronger on the other side.

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