Establishing credit after divorce

See where you are, then build good credit slowly, says Sally

By Sally Herigstad

To Her Credit

Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). Ask a question.

Dear To Her Credit,
I've been a stay-at-home mom for the past 10 years. Now my husband and I are getting a divorce. I've never really had a job (unless you count working in the pizza place during high school), and I've never had a credit account of my own. Do I even have a credit score? How can I start to get my own credit and improve my credit score?
-- Lisa

Dear Lisa,
You may not have had your own credit card accounts, but you probably have more in your credit history than you think. If you and your husband opened joint credit card accounts or took out a mortgage together, the activity on those accounts is reported on both of your credit reports -- regardless of who applied for the credit or who made the payments. In fact, by law, any creditor who reports the credit history of a joint account must report it in both names. 

If your husband opened an individual account and added you as an authorized user, that's even better. As an authorized user, you can use the account, but you are not responsible for paying the debt. The creditor must still report the credit history of the account in your name as well as in your husband's. (Note: Some new credit scoring models exclude information from authorized user accounts.) For a small fee, you can purchase your credit score as well as download a free copy of your credit report on the Internet.

This works to your benefit if all the accounts are in good standing. However, if they show a history of late payments, they have a negative impact on your credit score instead. In any case, it's time to establish your own credit history.

The first thing you should do to improve your credit history as a single person is to acquire your own credit. If you have income, such as alimony, you can apply for an account in your name only -- even if you don't have your own earned income. Sometimes department store cards or in-store financing for items like carpet or furniture are easier to get. Steer clear of cards or loans with a very high interest rate -- especially if you might not be able to pay the balance off every month.

If you have trouble getting your first card, consider getting a secured card. That's a card that requires you to make a deposit with a bank or credit union account and then gives you a credit limit equal to the amount you have on deposit. A secured card gives you a chance to prove yourself without putting the bank at risk. Make sure the bank reports your account history so you get credit for your responsible behavior.

You may be able to get a car loan without too much trouble, too. The car loan is secured by the car, which lowers the risk for the lender.

Because both of you are liable for the total amount of debt on any joint account, you should get out of any joint accounts as quickly as possible or call the issuer and put a freeze on the account until you both agree on who owes what. Minimum payments must still be made on a frozen account. That doesn't necessarily mean you should close all your joint accounts, however. Older credit accounts in good standing help your credit score more than new accounts do. The bank may let you change an account from a joint account to an individual account. They are not obligated to do so, but it's worth asking. If you can't get the account changed to an individual account, it may be in your best interest to close the joint accounts slowly over time as you build up new credit. This way, you won't to be held liable for any new debt on a joint account that isn't yours after the divorce.

Build your credit history slowly and meticulously. The goal is not to get a lot of credit fast, but to work up to a few accounts with as close to a perfect record as you can get.

Congratulations on thinking ahead about your financial future during this difficult time! You alone are responsible for your financial future from here on. You should be commended for taking control of your money -- and your life.

To Her Credit answers a question about a debt or credit issue from a CreditCards.com reader each week.
Send your question to Sally.

Published: April 4, 2008

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