Divorce can impact your life in a number of ways. When it comes to financial issues, many people worry about the impact divorce can have on their credit.
Given the nature of credit scores and reporting, some of these effects are unavoidable. However, there are steps you can take to repair your finances and begin a bright, financial future.
How divorce can affect a person’s credit
If you and your spouse currently share a credit card, you will need to consider how to handle any remaining debt. If you agree to pay off the balance and close the card, your credit utilization rate will increase. If the utilization rate increases, your score could also go up as a result.
If you and your former spouse decide to keep the card open and make payments together, you could have a harder time paying more than the minimum monthly payment due to reduced income. Your score can also go up if your spouse refuses to pay their portion of the debt, since the card will be in both of your names.
What you can do to bounce back
If you do close the card, open a new one and use it responsibly. While the age of the credit does count towards your score, having access to more credit products can decrease your utilization rate. If you do choose to keep the account open, be sure to make payments on time every month. If possible, make more than the monthly payment to keep interest low.
If your credit is badly impacted and you want to rebuild it, consider a secured card. These cards require a deposit, which acts as your credit limit. They are a great way to rebuild your credit until your score is good again.