Taking the time to repair credit helps divorcees

Divorce can obviously be a trying time in any person’s life, but those going through it likely know all too well that it not only puts an emotional strain on those involved, but can also take a serious financial toll.

During this time, it’s not uncommon for either spouse going through a divorce to start experiencing credit missteps for one reason or another, and though these are often made through no fault of their own, lenders will view all mistakes as being more or less equal, regardless of whether they were intended. As such, many people who have been through the process might come out the other side in serious need of credit repair, and fortunately there are a number of ways to go about doing this, and get their standing back to where it was before the issues arose.

The most common problems

During a divorce, there can be a lot of things on a person’s mind, and making sure all their credit card, auto financing, student loans, and mortgage bills are paid on time and in full unfortunately might not always be one of them. And problematically for these borrowers, missing one deadline out of the many they may have to keep track of over the course of a month can take a huge bite out of their rating. That’s because payment history accounts for 35 percent of a person’s total rating, and therefore that one misstep can do a lot of damage rather quickly.

When such an issue arises, one of the most effective ways of correcting such missteps is with the help of a credit repair company to help in challenging the negative credit report markings as well as continuing to make all subsequent payments on time and in full.

Another rather common mistake many borrowers make during divorce proceedings is leaning too heavily on their credit cards to make everyday purchases, or pay other bills, which in turn can significantly increase the amount they owe on those accounts in a rather short period of time. That will take its toll on their rating because lenders want to see borrowers who can keep their outstanding debts under control. The way this is measured is with what is known as “credit utilization ratio,” which simply means the amount being borrowed at any given time versus the total value of a person’s limits. In general, lenders want borrowers to keep their credit utilization to about 30 percent of the maximums allowed across all accounts.

Therefore, those who have racked up, say, $2,500 in debt but only have limits of $5,000 across two cards — how it’s divided up on those accounts doesn’t matter — are using 50 percent of their total limits, and should try to cut their balances to just $1,500 to get back to the 30 percent level recommended to maximize this portion of their score.

Another mistake consumers might make during this time is canceling accounts they previously held jointly with their spouse, rather than dividing the debt up and opening new ones. While both will diminish a person’s rating because it will lower the average amount of time they’ve had all their accounts, the latter option will allow that average credit age to continue to grow once again, and because that factor makes up 15 percent of a person’s rating, it can be crucial going forward.

Why credit repair can be vital

Often, a divorce means that both spouses will have to start new lives, and that may include big financial changes. Having a good credit score can be beneficial when doing so for many reasons. For instance, their rating will be used not only to determine whether they will qualify for a new line of credit at all, but will also determine the terms of such an agreement. Those with lower credit ratings will not have the access to top-notch deals, low rates and fees, and other benefits that those with strong ratings might, and that can make financing more difficult to obtain, but also more expensive. As such, while taking the time to work on credit repair in a comprehensive manner is a wise choice for any person, it can be particularly advantageous for divorcing couples.

Of course, another crucial part of making sure one’s credit is as good as it possibly can be is taking the time to order copies of their credit reports and checking them over closely. These documents may sometimes contain unfair markings that can diminish a person’s standing, but working with a credit repair company may be able to help correct such an issue and return their rating to where it should be.

Posted in Credit Repair
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