Archive for the ‘Divorce’ Category
In Tip 10, I discuss how to start watching your finances and why it is important to pay attention to your money.
I have posted a video series to the MyCredEd YouTube channel discussing how you can protect your credit during divorce. Remember, your divorce will be over soon, but the effects of a credit problem can last years longer!
You can view the Tip 10 video here:
Remember to ask your questions about credit and debt in the form to the right. I will answer via blog or video as soon as I can!
When you fill out the form, your question goes straight to my email inbox. I am an email addict, so I will see it quickly. If I put your question into a video, or answer it in a blog, I will send you and email back to let you know the answer is ready.
If you are going through a divorce, your thoughts are probably not focused on what your credit score looks like. However, this is exactly the time to think about these issues!
I have posted a video series to the MyCredEd YouTube channel discussing how you can protect your credit during this tough time. Remember, your divorce will be over soon, but the effects of a credit problem can last years longer!
You can view the Introduction video here:
Remember to ask your questions about credit and debt in the form to the right. I will answer via blog or video as soon as I can!
When you fill out the form, your question goes straight to my email inbox. I am an email addict, so I will see it quickly. If I put your question into a video, or answer it in a blog, I will send you and email back to let you know the answer is ready.
When you are going through a divorce, your finances can get a bit confusing. ‘What money is mine’? ‘What do I have to pay’? ‘What do I do next’?
When I was getting divorced, I never really considered the ‘me’ part of the equation. I was worried about the joint accounts, joint credit, and joint kids, but I didn’t take any time to consider what I was doing to myself financially. I ended up making a BUNCH of mistakes, which I sincerely hope you can avoid. Most of my mistakes revolved around the management of credit, but I also made mistakes regarding WHEN to get credit.
Let me give you a couple of key things to think about:
1) A fairly hefty part of your credit scores, about 10%, revolves around HOW LONG you have had your accounts open. A new account has less power than an older account.
2) When you get divorced, you may not be able to keep some of your credit cards, and you may have to sell or give up your stake in cars, houses, or other assets.
Therein lies the dilemma. If you end up getting rid of a credit card, as an example, that you have had for 5 years, you may take a hit on your credit scores. Your house that you have been paying on for 10 years may go away. In other words, the AGE of your credit may be reduced.
There are a few simple things you can do to fix that. First, call your creditors and ask them if they will issue you a new card. This will start the clock over before you have to give up your old cards. You will still take a hit, but a six month head start can really help.
Second, go ahead and take care of yourself. If you will be losing your car, get another one. You can rent or buy a new house. Just remember that you will be qualifying WITHOUT your spouses’ income, so make sure you overextend.
The simple point here is that you can open credit for yourself AT ANY TIME, as long as you qualify for it. That can happen before your divorce, while happily married, or any time after the divorce. You have to be able to make payments, but if you qualify the credit can be yours.
A final note: If you have filed for divorce, or even separation, and you use your spouses’ information on the application as a co-borrower, you are likely to get in trouble with the courts. You aren’t sharing that money any more, so use what you make and don’t risk the pusishment that may come your way.
If you are going through a divorce, you really need to read my FREE e-Book ‘The Top 10 Ways To Save Your Credit During Divorce’. This book will guide you through some things you need to do to protect yourself as you go through this tough time. Just click the link above to get your free copy.
When I got divorced, I never really thought about my credit scores. To that point, I had a perfect payment record, a mortgage, two car payments, a home improvement loan, and a couple of credit cards. Add in 3 kids and a dog, and it was kind of the all-American family. My credit scores were in the high 700’s the last time I had checked them for a mortgage re-finance, so all was in order. I was living the dream.
Then, like a ton of bricks, the bottom fell out. Those 4 little words, ‘I want a divorce’, changed it all. When that happened to me, I stopped really considering the financial aspects of my life, and started thinking about the interpersonal and relationship areas. I went to classes, learned basic communications, and basically got things in order. But still, I just didn’t pay much attention to my credit.
Over time, that oversight caught up with me. When I first moved into my own place while separated, I went out and bought a TV and stereo on credit. Then I decided a couch would be a good thing, and a few pots and pans. Did I pay with cash? Of course not, I used credit.
That first few months, during the initial separation, were fine. My ex and I agreed on money, and I had enough to live. Then she actually filed for divorce. When that happened, the judge, in his infinite wisdom, gave us some ‘temporary orders’ which gave me $1,137.00 per month to live on. That was roughly a sixth of my take home at the time (Remember the dot-com days? Ah, the pay rates! The Perks! The worthless stock!) I did some math. I paid $450.00 for my car each month, plus insurance. $140.00 for the stereo and TV. $60.00 for the household items. $60.00 for the couch. Add in a 60 mile commute each way from the only place I could find that was cheap enough to live, and my bills ran up to about $1970.00 per month if I didn’t eat. This, by the way, is NOT a good weight loss plan. So, I had an $800.00 deficit in cash flow. That is a fancy term which means I lived on credit. It grew over the next year to about $12,000.00 in credit debt.
Then, the divorce happened. No more temporary orders! I GOT HALF OF MY TAKE HOME PAY!!!
Talk about living well. I could afford Ramen noodles, and twice a week I would splurge and buy some soft drinks. I was living well! OK, actually it wasn’t that bad. I managed my money well, still hadn’t missed a payment, and was paying down my debt.
Then, wonder of wonders, I lost my job. The company closed in 2003, and the market was horrible. I went under.
Now, I can’t blame that on the divorce, but my credit got trashed trying to recover from the living expenses I charged. I ended up not being able to pay the cards or department store charges, and got 5 negatives on my credit report. More damage was done, but the divorce, and the subsequent payment problems, left me in real credit problems.
I still haven’t told you how this can affect your credit yet. Let’s take a look at that now.
The credit cards I used while on temporary orders were joint with my ex. So when I stopped making payments, it affected HER credit. The car was in both names as well, so that was a hit to her. And she decided paying for her car should be my responsibility without letting me know that, so the payments slipped there as well. That hit both of us with late payments on our credit reports.
Eventually I filed bankruptcy, and was able to clear my bad items off of her report by claiming them as part of the divorce. My credit, however, was trashed. This was clearly my fault, but it did happen.
I can give you another example. A friend of mine, Sherry, got divorced 8 years ago. Her ex had just gotten a workman’s comp settlement, and they had enough money to pay off all their expenses as they parted ways. It should have been an easy thing to take care of, but her ex was dishonest. Instead of mailing all the payments, he cleaned out their account and disappeared. Since Sherry had made out all the checks, she assumed the debt was gone. After a couple of months, her phone started ringing, and she discovered that she was over $50,000.00 in debt. Her ex was nowhere to be found, and had even stopped making child support payments. If she had handled the payments herself, and gotten certified funds to cover payments, he could not have caused this damage to her credit and lifestyle. She ended up having to take care of all the debt by getting on payment schedules, and she is still paying part of it off.
As you well know if you are reading this, emotions run high during a divorce. There is a lot of blame, many ill feelings, and you probably don’t care much about finances outside of basic survival. However, the impact of a bad decision regarding credit is at least 7 years of a negative item on your credit report, and the possibility of collections, court appearances, and even bankruptcy.
Let’s take a look at some of the things you can do to protect your credit when a divorce happens:
1) Get your own credit cards. If each of you wants to keep cards from the current vendors, do so, but make sure they are in one name only. Joint cards need to be cancelled, and new cards issued. Most credit card companies will allow you to get a new card with the same balance as the old, but in only one name, unless the credit line requires both of your incomes.
2) Put it in writing. Make sure that the debts you have are all accounted for, and that each of you acknowledges in writing what his or her responsibilities are. If one of you defaults, this can be used by the other to protect their credit report and standing to some extent.
3) Get your own bank account. You have every right to do this. You don’t have to share an account. I got an account at the same bank at which I had a joint account with my ex, and I used the old joint account to transfer alimony and child support to her. She doesn’t need to see how I spend my money, and I don’t need to see her spending habits.
4) Build a budget. Things have changed, and you probably don’t have as much disposable income as you once did. Don’t make the mistake of continuing to spend the way you used to. Remember, you are responsible for your own actions, and if you overextend, you will still owe the money. Programs like Quicken or Microsoft Money are great for helping with this, but a piece of paper and pencil will work just fine.
5) Get educated. If you have been relying on the financial knowledge of your spouse, you need to figure things out for yourself.
6) Protect yourself. If you are making payments for your debt, make sure the payment can be tracked. If you don’t trust your ex to make payments, you take responsibility for making the payment yourself, and get the money from your ex to make the payment. Remember, a joint account is the responsibility of both of you to pay, so make sure it gets paid on time.
Nothing about divorce is pleasant, but with a little planning and forethought you can protect your financial standing. Of course, if while married you have ended up with bad credit, a divorce can be a great way to re-start. No matter where you stand, make sure you look after your own best interests. After your divorce is final, you won’t have that particular partner, but you will still have your credit scores and standing, and working toward protecting it now can do you a world of good later.
One final note: When I was going through my divorce, far and away the best thing I did was to go through the Rebuilding Seminars. To get more information, or for other resources, you should go to http://www.divorceseminarcenter.com/ and look for yourself. Many of my best friends were made in these seminars, and the opportunity to be with people who are going through the same thing is priceless.
If you are going through a divorce, you really need to read my FREE e-Book ‘The Top 10 Ways To Save Your Credit During Divorce’. This book will guide you through some things you need to do to protect yourself as you go through this tough time. Just click the link above to get your free copy.
