Monday, August 24, 2015

Credit Tips for the Recently Divorced

Divorce can take its toll on you emotionally as well as financially. While it doesn’t directly impact your credit, it can certainly impact your credit indirectly. Joint debt, for example, needs to be paid even while the divorce terms are being negotiated. If it’s not, it goes on your (and your ex-spouse’s) credit as a non-payment. That might not matter in the short-term but it will impact your ability to obtain credit like a mortgage in the future.
While you may not want to buy a home too soon, it’s a good idea to get your credit in order for the time when you’re ready. Here are credit tips for the recently divorced:
Ø  Update Accounts. Review your divorce decree to determine which assets and liabilities need to be split between you and your ex-spouse. Just because the information is in a court document doesn’t mean your creditors know who owes the money. Creditors just want payments to be made; you need to notify them of who is responsible for the debt. You also want to make changes to assets to be sure the proper names are on titles to vehicles, homes, bank, and investment accounts. If you don’t make these changes and your ex-spouse isn’t paying their debt, you can be held responsible. Late and non-payments can impact whether or not a lender approves your mortgage.
Ø  Get Your Credit Reports. This is so important because when dividing households you want to make sure only the accounts you agreed to pay at the time of your divorce are showing on your credit…if there are others, catch them early so they can’t hurt you. If there are discrepancies, you can take care of them before it’s a time crunch to get your house closed. Monitor credit quarterly using  you get 1 free report from each of the 3 bureaus each year, so if you spread them out throughout the year you can keep your fingers on the pulse of your credit- so to speak.   
Ø  On-time Payments. Even if divorce has impacted your credit negatively, you can begin improving your credit simply by paying your bills on time. This includes credit cards, and vehicle and other loans. Yes, it really is that simple! It takes time but the slow and steady course will eventually allow you to win!
Ø  Create a Budget. Whether it’s the bigger picture of retirement and investment savings- getting your kids off to college or your personal monthly budget, you’ve got to know where you stand financially. Create a list of income and expenses to see where you can make changes. You may need to live in a less expensive place to be able to cover monthly expenses, now to make your future the one you hope for!  Remember your goals in the day to day of life and you will be able to save to buy a new home, take those dream vacations, get those kids off to college or whatever your heart desires!
Ø  Build Your Credit. If divorce (or other circumstance) has taken a toll on your credit, consider getting a secured credit card or using a credit builder account like that offered by BMO Harris Bank. They deposit $1,000 into an account with your name on it and you make a payment to them each month for 2 years and at the end of it you have $1,000+interest (to help with your down payment) but more importantly they have been reporting your payment history and you have great credit! The payments you make are reported to credit agencies and can improve your credit within a year or two.
Ø  Review your retirement accounts/ life insurance beneficiaries Now that your now is being protected, you need to look at your future.  Make sure your beneficiaries for all life insurance and retirement accounts have been changed to reflect who you want the money to go to.  This is a step many forget about, so go the extra mile and make sure your loved ones with get everything you want them to.

At Beery Realty, we help our clients through the home buying process. But more importantly we are here before and after to be your resource and your guide.  
Some work on your credit today will help you obtain a mortgage in the future. If you have questions or need some help working through some of these steps I have many ways to help! Remember I am just a call away!