How to Protect and Rebuild Your Credit in a Divorce

How to Build Your Credit During Divorce

There are several things you should do to protect and rebuild your credit during and after a divorce.  Here are some actions to consider:

Keep paying your bills.  You may be tempted to stop making payments out of spite, but this is a critical time when you really can’t afford to miss payments if any way possible.  Missed payments will be reported on your credit profile and that could have a ripple impact on trying to obtain credit in your own name after a divorce is finalized.

Don’t ignore bills you can’t afford to pay.  The financial impacts of a divorce can put a real strain on individuals who will see a considerable change in their ability to live on their own and pay bills on their own.  Sometimes, existing obligations incurred during marriage are overwhelming.

If you can’t meet these obligations, don’t blow off your creditors.  You will be punished for it.  Instead, reach out to them and explain your situation.  If you show a willingness to try and make things right, creditors may be more forgiving of your situation and work with you.  Remember, they want to get paid too.

Change your passwords and update your contact information.  It’s critical to make sure your spouse can’t access your financial information.  Immediately change your passwords so this won’t happen (consider doing it for social media accounts too).

If you have already moved out, be prompt in changing your address information as well.  You want all sensitive banking information coming directly to you.  It also adds more security against your spouse snooping on you.

Ask for help.  Consider getting help through a consumer credit counseling agency if you’re having trouble paying all your bills.  Be wary of those that offer a quick fix.  But legitimate non-profits can offer innovative solutions and help you work with creditors to find solutions to your short and long-term financial issues.

Close or separate your joint accounts.  Until you do this, you are both responsible for the debt incurred, including any new debt that a spouse may run up.

Contact your creditors to find out what options are available to either transfer your account to the person who will responsible for paying the debt or how to close an account and deal with the remaining balance.  You will probably have a legal responsibility to pay existing balances unless the creditor agrees to release you from the debt.

You will also be responsible for any bad debts accrued by your ex-spouse after a divorce, even if your divorce decree says that your spouse is responsible for those debts.

Start by taking small steps to rebuild your credit.  If you’ve had limited credit in the past or the other spouse has been in control of finances, you may need to start small to build an independent profile.  You can do this a couple of ways.

Consider getting a secured credit card which requires either maintaining a savings account or putting up the amount of credit you want in a separate account as collateral.  Also consider getting a department store credit card or a card through your bank.

If needed, you can approach friends or relatives and ask them to be co-signors for credit in your name until you’re able to secure credit on your own.

Monitor your credit score on a regular basis.  You can get a free copy of your credit report through, or you can purchase copies through any of the bureaus as well.

Understanding your credit score and reviewing your credit history will give you some perspective about what you need to do to improve your situation.  It may also help identify any inaccuracies that you can work on to correct.

Free versions of your score are also available through,, or

Many banks and credit unions such as Wells Fargo also offer free scores as a feature of their checking accounts.

One action you can take if you have poor credit.  By law, you can send a written explanation of up to 100 words to credit bureaus and ask that it be attached to your credit history.

You can use this to explain extenuating circumstances such as a divorce, an irresponsible spouse who racked up debt or any other things that have impacted your credit.  It will not improve your credit score but might help potential employers/landlords/creditors understand the root of your financial problems and give you the benefit of a doubt in some cases.

Create a budget…and live within it.  Everything you know about being responsible comes into play when you create a budget and then must live within it.  You are going to go through an upheaval, and you can be especially challenged if you have not had primary responsibility for household budgeting in the past.

On top of this, you’ll be on an emotional rollercoaster that will also challenge you as well.  You could make financial mistakes out of sadness, ignorance or anger (or even bliss!) but until you get a clear picture of how your life will stack up after divorce, you need to be conservative, purchase only necessities and set aside your needs for gratification until a later time.

If your current income and any alimony and child support you may be receiving are not enough, you will need to look into finding a better job, adding part-time work or developing other means to sustain yourself.

Do not go on spending binges or revenge shopping excursions.  Sometimes, we try to spend out way out of a bad mood.  Most times, we’re just left with a big credit card hangover and we don’t feel any better after our sprees are over.

Don’t get reckless with finances because if you do, it could come back to haunt you.  A judge may decide that instead of being marital debt that should be shared equally, the offending spouse may be held responsible for all of it.

Until you know clearly what your finances are, it doesn’t make sense to hamstring yourself with debts that could put a real crimp in your life going forward.

Surround yourself with a great team.  Much like Humpty Dumpty after a fall, you may need help in putting your financial health back together again after a divorce.  You may be knowledgeable about what to do but remember that you’re also dealing with all the other moving parts of a divorce as well, including the oft tricky emotional component.

Don’t be coy about seeking out quality professionals who can help you with financial planning, tax strategies, asset division, pension issues, budgeting, investment strategies and so forth going forward.  Consider retaining a CDFA, CFP, or other similar financial experts along with a seasoned family law attorney to give you advice that could save you from making big and long-lasting mistakes.

Do not underestimate the value of also seeking out a therapist to help you with the emotional component as well, since that part of divorce can have a major influence on the financial decisions you make.

If you don’t know, ask questions and learn.  Unless you live in the world of finance and/or divorce, much of what you’ll come across will be new to you.  Expect to feel intimidated.  It’s normal.  But also admit you don’t know what you don’t know and take steps to rectify it.

Spend time learning about things you are not comfortable with.  You can rely on professionals, but nobody will protect your interests like you will protect your interests.  Knowledge is an investment and the more you have of it, the less anxiety you’ll have and more confidence in your ability to make the right choices going forward.

Use legal tools to protect your financial interests.  If you have an uncooperative spouse, one that won’t pay the bills they are ordered to do so in a divorce, you may have little recourse but to pursue civil court actions against them.

A divorce decree is a legal and binding document and when a spouse does not live up to the terms contained in that document, they could be held liable.  This may mean they are not paying alimony or child support or refusing to pay agreed upon debts in a timely manner.

When a spouse does not comply, it can impact your finances, create budgetary and financial bottlenecks and threaten your credit rating, all of which can negatively affect you for years to come.

There are legal remedies such as garnishing wages to compel an ex-spouse to comply and while this will create additional animosity, you need to be tough and protective of your own interests first and foremost.

Consider bankruptcy as a last resort.  If you’re overwhelmed and can’t get out from under, consider bankruptcy.  It is not easy.  It is not advisable.  And it will not solve all of your financial problems.

Filing for bankruptcy does not guarantee that it will be granted.  Your case must be heard in court before a judgment can be made.  However, even if all you do is file bankruptcy papers with the court, it gets reported on your credit profile.

Bankruptcy remains on your credit history for 10 years.  It removes most debts, but not all of them.  You will still need to pay alimony, child support, taxes secured by liens and student loans or risk even further financial challenges.

During this time, you’ll find it almost impossible to get a new mortgage, a personal loan or a credit card.

If you think your former spouse is going to file for bankruptcy, you need to contact your divorce attorney immediately to see if you have exposure and to learn how you can protect your credit and your finances.

Looking for more great tips on divorce and money? Here are a few of our favorite guides and resources:

Contributions by: Jason Crowley, CFA, CFP, CDFA

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