How to Build Credit After Divorce

Divorce can upend your life in a number of different ways, and your credit is one of them. Divorce-related changes in your financial situation can have a negative impact on your credit score. 

Fortunately, this impact doesn’t last forever. Take a look at how to build credit after divorce.

How to build credit after divorce

Not sure how to build credit after divorce? These are some strategies that may help.

Using a credit-builder app

Many online services make building your credit relatively straightforward. Kikoff is one of these services. Here’s how it works:

• If you apply and are approved, we give you a small credit line
• You use the credit line to make purchases in the Kikoff store
• You make interest-free payments on those purchases over time
• We report your payments to all three credit bureaus

You can get our basic plan for a surprisingly low cost. If you want access to rent reporting and other advanced tools, one of our premium tiers may be the best option for you.

Open a credit card in your own name

It’s important to get your own credit card after divorce in order to build your credit. If your credit score isn’t high enough to qualify for a traditional card, consider applying for a secured credit card.

Become an authorized user

If you have a trustworthy family member or friend with good credit, ask if they would be willing to add you to their account as an authorized user.

How divorce affects your credit score

Divorce itself doesn’t impact your credit. However, it can affect your score indirectly in many ways.

Joint debts and accounts

Your divorce decree should specify who will maintain ownership of joint obligations, such as mortgages and car loans. However, no matter what the decree says, your name will remain tied to an account until you take action to remove it. 

For example, if your name is still on the mortgage and your spouse makes late payments, those payments will impact your credit, too. If your spouse was granted the house in the divorce, you must take your name off the mortgage in order to protect your credit.

Lowering your available credit

If you shared one or more credit cards with your spouse, your total available credit is likely to decrease when you separate the accounts. Carrying a balance on your card will then increase your total utilization, which lowers your credit score.

Here’s an example. Imagine that you owe $5,000 on your own credit card, which has a limit of $10,000. You and your spouse also shared a paid-off credit card with a $20,000 limit. 

Before your divorce, you were using about 17% of your available credit. This is a healthy percentage; it’s recommended that you use no more than 30% of your available credit. 

After your divorce, you remove yourself as an authorized user from the shared credit card. You’re now using $5,000 out of just $10,000 in credit available to you. Because of the sharp increase in your total credit utilization, your score is likely to drop.

What to do immediately after a divorce is finalized

Before you start your post-divorce credit-building journey, there are a few key steps you should take. 

Most importantly, you should completely separate your finances, if you haven’t done so already. Closing joint accounts (or taking your name off joint accounts that your ex-spouse will keep) is important.

If you’re having trouble figuring out how to separate your finances, your divorce lawyer will be able to help you. 

Don’t skip this step. After a divorce, some people may try to sabotage their ex’s finances.

How alimony, child support, and legal obligations affect credit

If you are ordered to pay alimony or child support in your divorce, make these obligations a priority. On-time payments won’t impact your credit score. 

However, if you make payments too late (in many cases, 180 days is the cutoff) and they go to collections, you may see your score drop significantly. Collection accounts will usually stay on your report for seven years, even after you pay them.

What to do if your credit was damaged by your ex

Figuring out how to build credit after divorce can be a challenge. If your ex damaged your credit, it can be even harder. These steps may help you reduce the risk of further damage:

• Get a copy of your credit report and check for inaccuracies
• Dispute any fraudulent activities or inaccuracies with the credit bureaus
• Contact creditors and provide a copy of your divorce decree to take your name off joint accounts
• Freeze your credit if you suspect that your ex-spouse may try to steal your identity

Depending on your financial situation and your relationship with your ex, not all of these steps will apply to you. Your divorce lawyer or financial advisor should be able to offer individualized advice. 

Need help building your credit after divorce?

At Kikoff, we understand that building and managing credit isn’t always easy. And if you’re trying to build credit after divorce, you might be unsure of what steps to take next.

When you download the Kikoff app, you can start your post-divorce credit journey off on the right foot. Reach out if you have any questions, or get started with us today!