When a couple decides to divorce, it’s more than a breakup of ways. You may need to split assets such as your home or car, and you may need to repay joint obligations such as credit cards and loans. If not handled correctly, these actions can cause a negative blow to your credit history and score.
My divorce in 1998 was very easy. We bought a condo in our own name before we got married, so we had our own credit card so it wasn’t on the table as a joint asset. The only real asset we had together was our car – and I was willing to give it to him.
However, not all divorces are as simple as mine. No one enters marriage. But if that’s the case, and if you have joint assets such as credit cards, your finances can be complicated. After a divorce, keeping your financial home organized should be your number one priority.
Jacqueline Newman, a New York City-based divorce lawyer and author of “New Rules of Divorce: 12 Secrets to Protect Your Wealth, Health and Happiness,” says many people, even those who have not experienced divorce, experience extreme anxiety when experiencing finances.
“Adding divorces to the mix will exponentially jump your stress levels,” says Newman. “Two homes are always more expensive than one. So if everyone is financially tight when they’re under one roof, paying for two roofs makes it even closer.”
Below we provide a checklist of what to do to help solid financial foundations build life after your visit.
Create a new budget
After a divorce, you may need to look at it Your budget And change your lifestyle. Track your expenses to see what your expenses look like. This is as easy as creating a budgeting spreadsheet using Google Sheets, Microsoft Excel, budgeting tools, and even ChatGPT. Next, take stock of the money you make and all your expenses.
Please check the items that contain:
- Rent or mortgage payments
- Fixed Asset Tax
- Car payment
- gasoline
- food
- Utilities
- Childcare
- Insurance fees
- Student loan payments
- Medical expenses
- Tuition fees
- Home and car maintenance
- Gym membership
- Entertainment and hobbies
- Clothing and personal care
- trip
- Auto Subscription
It can be painful, but you need to know where you stand in the after-work world. This will allow you to follow the path to economic security. The savings you find are worth it.
Please check your account
Often, clients start their marriage with a good credit score and get an exit with a scary score, says Newman. “It can be particularly harmful for too many spouses who have to try to qualify for a mortgage and have little intrusiveness to their income flow or assets,” she explains. “Many people are in debt during divorce due to legal costs and additional costs to separate them into new homes.”
Newman said there are people who have not been able to make credit card payments because they are unable to pay their debts due to lack of funds. “On the other hand, many people end up liquidating their assets during divorce, providing cash to pay off their debts, and improving their credit scores after divorce.”
Freeze your card and create a list of your card and its balances. “We can understand the concerns of clients about their spouses who are engaged in retail therapy, so we generally recommend putting a credit card limit rather than canceling them all together,” says Newman. “The court doesn’t like when a spouse completely cuts off another spouse’s credit card while he is on hold for divorce.”
Check your credit report
“When a client first comes to see me, I often suggest that I run a credit check to make sure they know what’s in their name well,” says Newman. “That being said, there are a lot of credit card scams, so it’s probably a good thing that everyone does this on a regular basis.”
Check out our free credit reports every week at AnnualCreditreport.com. Make sure that your identifiable information, such as your name, address, Social Security number, account, and loan are correct. The Consumer Financial Protection Bureau (CFPB) recommends looking for other issues, including:
- Accounts belonging to someone else with the same or similar name as you
- Closed accounts reported to be open
- Accounts reported incorrectly are reported as late or late
- The same debt has been listed multiple times, and possibly with a different name
- Accounts with incorrect current balance or credit limit
Dealing with balances can be difficult, according to Newman, without a prenuptial agreement that specifies that each party is liable for their respective credit liabilities. “If someone is essentially married and is owing credit card debt for customary expenses for the marriage, a credit card could be considered a married couple’s debt,” she says. “Depending on which state you are in, you can start a divorce lawsuit and try to get a cutoff date for your assets and liabilities accumulation, but there are many strategic reasons that may not be a great idea.”
If possible, immediately enter into a contract with an existing ex-spouse and remove them from your account for repaying them. If you can’t reach your contract, make sure to include paying your card in your budget so that your credit score doesn’t hit. You can also consider I’ll give you a personal loan To repay credit card debt.
Call the card issuer and ask Remove approved users from your account Close the joint credit card. It only takes a few minutes, but it brings valuable security.
Get a new account number
While you are on the phone with the issuer, ask them to send you a credit card with your new account number, especially if you and your ex have a joint card. Ideally, everything will be resolved after removing the original from the card, but sometimes things can pass through the cracks.
What you want to avoid is to earn an Ex on your new credit card. Not only does this cost money, but you can also drag your credit score. New account number can protect your card and your credit history
Create a credit history
If you are an authorized user or a second user of a co-credit card, it’s now time to build your own credit history. This can be daunting, but the simple first step is to apply for a credit card. If you don’t have a credit history, Bankrate recommends these Uncredit card. If you are rebuilding your credits, please check it out These bank rate picks.
Use your new credit card to make small purchases or add a small bill that you can pay back each month. It’s important to make a monthly payment, as delays can cause dings to the credit score you’re trying to build. If you are not ready to apply for your own card, consider asking certified users to help build credits with family and friends and taking responsibility when using your card.
Pay attention to credit usage rates
Almost 40% of cardholders have either made the most of their credit cards or are approaching, since the Federal Reserve began raising interest rates in March 2022. Bankrate Credit Use Survey. FICO recommends that your card have a credit usage rate of less than 30%.
To understand what this actually means, if you have a credit limit of $1,000 and a balance of $750, the ratio is 75%, which is considered high. To remain at a ratio of less than 30%, your balance must be under $300. Credit usage is one of the factors used to determine your credit score, so paying attention when applying for your card in the future can be helpful.
Find a new source of income
After the divorce I had bills to pay and a tighter budget. That meant they had to find new ways to make money, including working in retail and helping people write their resumes.
There are far more these days Side Hustle Options You can bring in additional cash, such as online sales, driving ride-sharing services, food delivery, dog walks, tutoring, and providing parts of the house via Airbnb. You also have the option to create passive income through channels such as YouTube, e-books, affiliate marketing, and sponsored social media posts.
Get help if necessary
You can’t do everything yourself, but there Lots of resources It will help there. If you are struggling with credit card debt, consider working with a credit counselor, such as a low-cost non-profit Money Management International (MMI). MMI works with credit card companies to reduce interest rates, set monthly payments that fit your budget, and reduce the time it takes to pay off your debt.
Other experts who can help you with:
- Certified Financial Planners that manage existing assets and help grow
- Financial Advisors who can help you plan plans such as retirement, fiscal budget, real estate planning, investment management, and more.
- Financial therapist, can provide support if you find that the stress of money is hurting your mental health
Do your research to see which of these options can best help you when you rebuild.
Conclusion
Reverting your credit back after a divorce can be an overwhelming experience that requires patience and discipline. The key is to look at awards when it comes to budgeting and restructuring your credit history.
Avoid undertaking unnecessary debts and monitor your credit score and utilization. That might be a good idea Reevaluate your credit card As your score rises. These strategies will help you rebuild your credits and regain your financial stability and independence as you begin your new, single life.
