While the majority of divorcing consumers have an understanding of credit, unfortunately, there are still those whose spouses ‘took care of all that stuff’ and they truly do not have the experience of working with credit and bill paying.Understanding the makeup of your credit score is the first step towards managing and improving it.
As you might expect, payment history is the most influential component and this is followed closely by the amounts owed. To lesser degrees, the length of time that you’ve utilized credit, the number of new accounts or inquiries that may have and the various types of credit accounts that you hold will also have an impact on your score.
The overall importance of any of these factors can be further influenced by the entirety of the information contained in your consumer credit report. As such, certain patterns, occurrences or items can be measured differently depending on any other factor or combination. There can be great complexity in the way that the scoring formulas work and it’s for this reason that they are difficult to assess.
Managing your credit prudently will include the obvious, yet at times, the opposite is also true. In an effort to effectively manage your credit scores, always try and remember the following:
- Have and follow a system to assure that your bills are always paid on time.
- Avoid late payments or the excessive use of credit by establishing and maintaining a cash ‘cushion’ to pay for unexpected expenses or repairs. It’s actually better to have a high credit limit with a low balance than to ‘max out’ your cards.
- Never close old accounts as the age of these can actually help and if you shop for credit, keep it to the shortest time period possible so that multiple inquiries are not counted against you.
- You need to have credit experience to have a credit score so don’t be afraid to use it, just be sure to keep it within your means.
- If you have established credit, don’t open new accounts solely for the sake of earning a discount on your purchases as in the long run, this can cost you much more in higher interest rates than you may save upfront.
- As well, too many accounts mean too many payments and this increases both the task of making those payments along with the possibility of missing one.
If at all possible, it is advantageous for both spouses to work together in maintaining existing credit histories. There are numerous opportunities to maintain strong credit through a divorce.
Derogatory credit can significantly impact not only mortgage financing options; but insurance premiums, employment opportunities, and more.
A Special Note to Women
A good credit history often is necessary to get credit. This can hurt many married, separated, divorced, and widowed women. Typically, there are two reasons women don’t have credit histories in their own names: either they lost their credit histories when they married and changed their names, or creditors reported accounts shared by married couples in the husband’s name only.
If you’re married, separated, divorced, or widowed, contact your local credit reporting companies to make sure all relevant bill payment information is in a file under your own name.
National credit reporting companies sell the information in your report to creditors, insurers, employers, and other businesses that, in turn, use it to evaluate your applications for credit, insurance, employment, or renting a home.
Please don’t hesitate to contact me with any questions or for more information
Involving a Certified Divorce Lending Professional (CDLP™) early in the divorce settlement agreement can help divorcing homeowners set the stage for a successful refinance of the marital home.
It is always important to work with an experienced mortgage professional who specializes in working with divorcing clients. A Certified Divorce Lending Professional (CDLP™) can help answer questions and provide excellent advice.
This is for informational purposes only and not for the purpose of providing legal or tax advice. You should contact an attorney or tax professional to obtain legal and tax advice. Interest rates and fees are estimates provided for informational purposes only and are subject to market changes. This is not a commitment to lend. Rates change daily – call for current quotations. The information contained in this newsletter has been prepared by, or purchased from, an independent third party and is distributed for consumer education purposes.
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