Building Credit After a Divorce

You should be aware that any credit history that was built together during your marriage is part of your credit rating, even if you personally did not sign for the loans and even if you were unaware of those loans.   This can lead to a poor credit score.  Sometimes the problem is simply that you do not have enough credit history built up, either because you are young or you and your spouse did not rely on credit.  This lack of credit history can lead to a low (negative) credit score.  Unfortunately, until you prove you are dependable you are assumed to be a high risk.  Now that you are on your own, you need to build a good credit history.  Luckily, it is simple to build an excellent credit rating which will allow you to borrow in the future at a lower interest rate, saving you money monthly and in total. 

Here are some options for building a good credit rating.  This should be done as soon as possible after the divorce, before you need to buy a house or other large loan.

1. Apply for a credit card and use it for monthly expenses.  Think of the card as a tool for building credit and use it just for that purpose.  
2. Sign up for the “budget” program from your gas or electric company.  Utilities sometimes offer a budget option which locks in a set monthly amount for a period of time, often a year.  Making payments on this amount will also build credit, as the utilities report to the credit agencies just like a bank. 
3. Purchase a piece of furniture on credit such as a sofa.  Make sure you make the payments on time.  The key is to make at least the minimum payment on time each month to build that credit history.  
4. Consider taking out a loan for a car.  A car is a very large purchase and is a long term loan, usually 3 – 5 years.  Make sure you can comfortably afford the payments!  Remember that if you make late payments you will worsen your credit rating, not make it better. 
    
   Caution - Do not borrow money if you are not absolutely positive that you will be able to make the minimum payments on time.  These payments should be mandatory in your mind, not discretionary like entertainment or dining out.  Treat your debt payments like your rent or housing payment:  it gets paid out of your check first.

It’s never too late to build or improve your credit rating, even if you have recently divorced.