Building Credit After Divorce

Tara Seboldt
May 10, 2022

From attorney fees to alimony and child support, divorce proceedings are expensive!

Throw in the emotional toll a divorce can take and there’s a good chance you’ll find yourself overwhelmed. Your credit score is probably the last thing on your mind.

Unfortunately, the cost of divorce can also take a toll on your credit score.

Keep reading to learn how divorce can change your personal finances and how you can start building credit after a divorce.

Does Divorce Affect My Credit Score?

The good news is divorce doesn’t directly impact your credit score.

Just like getting married, the three major credit bureaus—Equifax, TransUnion, and Experian—don’t care whether you’re married, separated, or divorced.

In fact, your marital status doesn’t even show up on your credit report.

That doesn’t mean your divorce won’t change your finances, including your debts.

Any debt you and your spouse have accumulated can affect your credit.

Likewise, any new debt you take on during or after the divorce could affect your score.

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How Does Divorce Affect My Credit Score Negatively?

Your changing financial situation can potentially hurt your credit score.

A few common situations can lead to lower credit scores for divorcees:

Undissolved Joint Debts

As you finalize your divorce, the court will issue a divorce decree. This document is an agreement between you, your soon-to-be former spouse, and the courts.

Among other things, the decree lays out who is responsible for which debts and financial obligations.

A divorce decree doesn’t absolve you of your responsibility to lenders, however. If you’re still listed on the account—even as an authorized user or secondary account holder—your ex-spouse’s actions will affect your credit.

For example, if your spouse is the one to continue living in your previously shared home, they are required to make the full monthly mortgage payment.

However, your name is still on the mortgage. If your ex-spouse misses a payment, it shows up on your credit report, too.

In addition, it can be harder for you to enter into an additional mortgage with the old one still in your name.

Spousal Sabotage

In an ideal situation, divorce is amicable and both spouses can part ways on good terms. Unfortunately, this isn’t always the case.

Some divorces are messy and can include one spouse attempting to financially sabotage the other.

Say you have a credit card and your spouse is an authorized user. They are unhappy about the divorce and decide to max out the card to put you into credit card debt.

Your score will likely drop due to the dip in your available credit. If you can’t pay off the credit card balance, you may even have to miss a payment or make late payments.

This further hurts your score, even though you weren’t the one to make the purchases.

How Do I Separate My Credit After Divorce?

Part of building credit after divorce is making sure your existing debts are separate from your ex-spouse. You can do this by breaking up joint accounts between you and your former spouse.

Some accounts, such as one where you’re an authorized user, may be as simple as requesting the creditor remove you. Other debts, such as mortgages, are more complicated.

You’ll usually have two options to help you separate your credit after divorce: refinance credit accounts or sell your assets.

Let’s say you and your spouse own a home with an active mortgage. If you are planning to live in the house, you could refinance the remaining mortgage. This lets you get a new home loan in your name only.

Alternatively, you and your spouse could agree to sell the house and split the proceeds (depending on the laws of your state and your divorce agreement). The proceeds could also go toward other joint debt, such as car loans or credit card debt, to help you both have a clean break.

Be sure to ask your attorney about any particular property laws in your state, especially if you live in a community property state.

Community Property States

Community property states require spouses to equally split all joint assets in a divorce.

The idea is to ease the stress of a divorce and make divorce agreements less complicated.

Nine states are community property states:

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

Only property obtained while you were married counts as community property. Any assets you owned before your marriage shouldn't be subject to community property laws.

How to Rebuild Your Credit After Divorce

If your credit score does take a hit during your divorce, don’t panic. There are plenty of ways to rebuild your credit.

Just be aware that going from poor credit to good credit takes time. You may not see improvements to your score for a few months and it could take years to reach the score you want.

Stay Current on Existing Payments

Your payment history makes up 35% of your FICO score. That means late or missed payments hurt your score.

Making on-time payments to credit cards and other debt is necessary to improve your score and maintain a good one.

Open Credit in Your Own Name

Once you dissolve or refinance joint debts, you need to open your own credit accounts.

While you shouldn’t open credit accounts just to have them, having an account in your name—and making on-time payments—will help build your credit history after divorce.

If you’re planning to change your name, be sure to do so before applying for new credit.

Some credit options after divorce include:

  • Secured credit cards: Secured cards require a cash deposit as collateral, making them a great option if you have bad credit. The credit card issuer uses your deposit as a safety net if you can’t pay your balances. After making on-time payments for a set period, your credit card company should refund your deposit.
  • Unsecured credit cards: An unsecured credit card is a normal card. If approved, you’ll get a credit limit that you can spend on the card. You should aim to keep your credit utilization ratio under 30% to help improve your credit score. Anything over that could potentially lower your score.
  • Installment loans: Installment loans like mortgages and car loans have fixed payments made over a period of time. However, you don’t have to go out and buy a new car to get an installment loan. A short-term personal loan requires much less financial commitment and will still help improve your score if you make on-time payments.

Monitor Your Score

Everyone is entitled to a free credit report from the major credit bureaus every 12 months.

You can request a copy of your credit report from AnnualCreditReport.com. Monitoring your credit can help you see the progress you’ve made and help prevent identity theft.

The Bottom Line on Building Your Credit After Divorce

It’s easy to overlook your credit score when going through a divorce—especially if your divorce is messy.

If you’re going through a divorce, make a plan to keep your credit rating on track. It might seem difficult right now, but it is possible to maintain a good credit score or rebuild credit after divorce. 

Tara Seboldt

Tara is a financial writer with over five years of professional writing experience. She previously worked at a financial planning firm. Tara uses this professional experience to help readers better understand their finances and make smart financial moves. When she’s not writing about money, Tara enjoys spending time in the Idaho mountains hiking, camping, and skiing.

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