Divorcing Couples Should Learn How to Fix Credit

A person’s credit can be significantly affected by major life events and perhaps among the most damaging in most instances is a divorce. During this time, borrowers often have more on their minds than making sure they’re maintaining perfect credit, but making any mistakes over the course of the process can be particularly problematic.

This is true for a number of reasons, the most obvious of which is that in general, divorcees might take a long time to come around to the fact that they might have damaged their credit during the process by missing a payment or taking on too much debt, and therefore have allowed many of these issues to become exacerbated. Further, having a diminished credit score can also be troubling for those who just went through a divorce because it might imperil their ability to obtain new lines of credit, which they may need as they begin life on their own once again.

In any case, divorcing couples should at least take the time to do routine credit repair in an effort to straighten out that part of their finances and ensure they’re doing all they can to make their standing work for them.

Credit mistakes that divorcing couples tend to make

Obviously the divorce process can be trying on anyone, emotionally and financially. And because of the latter consideration, many people might need to lean more heavily on credit than they otherwise would in their everyday lives, or let some considerations fall by the wayside simply because they may feel there are more pressing matters. Others may just forget to pay their bills once or twice during the proceedings.

However, regardless of circumstance, lenders don’t like to see borrowers who mishandle their credit for any reason, and whatever missteps may end up being made will diminish their credit ratings. One extremely common misstep during this time is that consumers simply don’t pay their bills for whatever reason, but the problem is that payment history accounts for 35 percent of a person’s rating, so any deadline that comes and goes without a payment will take a huge bite out of a borrower’s credit rating. And unfortunately, when it comes to fixing such an issue, the only thing a borrower can do is start making all payments on time and in full once again, and doing so for a period of several months or more. This will not erase the mistake they made in the past, but it may show lenders that it was an isolated incident, and over time, and with the help of a credit repair company, a borrower’s credit score may rise commensurately.

Another major mistake that divorcing couples often make during the process is that they start to lean too heavily on their credit cards to make purchases in their everyday lives. Using these accounts often to pay other bills or cover grocery costs and other necessities will necessarily lead to more debt to pay off every billing cycle, but for those who are already financially strapped, doing so may not be easy. That means more debt being carried from one month to the next, and consequently higher minimum payments, which can be troubling in general. But moreover, this type of account management also leads to higher debt utilization ratios, which makes up another 30 percent of a person’s credit rating.

Debt utilization is an industry term for the percentage of a person’s total available credit limits that they’re using at any one time, and essentially is used to determine whether they are stretching themselves too thin. Contrary to what may be popular belief, lenders don’t like to see borrowers carrying significant debts, and instead prefer balances that make up about 30 percent of one’s limits at most, at least if they want to maximize this portion of their score. The more debt they carry relative to their limits, the lower their score will be. As with missed payments, there is only one way to fix such an issue, and that’s taking the time to make larger payments that cut into large outstanding balances so that they shrink to more manageable levels.

What it might mean

For couples who have taken the time to fix their individual credit situations, the benefits can be apparent rather quickly. A good credit score gives borrowers access not only to more accounts than they might have been able to obtain in the past, but also better terms on those accounts. Lenders tend to save their most beneficial interest rates, fee structures and other perks for those with the best possible credit ratings, so taking the time to fix credit obviously has its financial benefits going forward.

Another thing borrowers should do to repair credit is order copies of their credit reports regularly and check them for any unfair markings. If any exist, working with a credit repair company can help to fix the problem.

Posted in Credit Repair
Learn how it works

Questions about credit repair?

Chat with an expert: 1-800-255-0263

Facebook Twitter LinkedIn