Lesson #11 – One day you have excellent credit, the next, not so much. The only credit card to my sole name was a Kohls card when my husband left. I rarely shop at Kohls. On a good year, maybe once. There is really not a reason I need a Kohls credit card but once upon a time I used it more often and they had excellent black Friday specials. I’ve kept it probably because of nostalgia since I’ve had it over 20 years. It’s not very helpful for purchasing gasoline or groceries. The two other credit cards I did have were closed a few months after he left. They were joint and my card was removed. This wasn’t really a surprise per say. I knew it was coming but there was no notice. You would be naive to expect otherwise but it still caused me to pause and have to address my needs and what I would do if I should need a credit card for an emergency. I didn’t use credit cards regularly before and prefer not to still. I stepped carefully and cautiously forward knowing that each step mattered for rebuilding my credit.
It’s amazing how removing a credit card, one higher credit card bill or one hard credit check will ding your credit score. It feels like being back in grade school where you miss one test and your grades are in the garbage. It always takes more work to bring it up than to drop it down. It’s the same for your credit score. It’s a long game of sorts. There’s no rushing it or way to skip the line, you just have to wait for it to climb, slow and steady.
Depending on your need will depend on if and when you need to get another credit card. Any loan you might need will inquire into your credit as well. So the more patient you can be and more strategic you can be, the quicker your score will rebound. Life happens to the best of us and you may find yourself in a situation where you need credit to get through the divorce. Payment options may not be there for attorney fees, debt you have to split or just to live on until the assets are divided and a settlement is reached. As I’ve talked about before in a post about financial planning here, getting sound advise from someone who can objectively look at where you are and what your needs are can be extremely helpful. Living within your means and not acquiring debt is the obvious preferred path but not always an option during divorce. Circumstances are rapidly changing and many are out of your control. So what can you do? Take it one step at a time.
In my case, I got two credit cards to pay off debt per a mediation agreement (which later was contested; see this post here). Since I had little to my name, I didn’t qualify for very high limits, hence, I had to open two cards to have enough to cover the debt. I looked for 0% interest for 12 or 18 months. I wasn’t interested in earning points, just paying off debt without accruing more. (Side note, I wish there was a way to use the same scale for child support and divide debt according to income. It doesn’t matter if you are a stay at home mom or a company executive, you get to pay half the debt no matter who’s name is on it in my state.) This was an immediate need, so I thought, and why I chose to open the cards. By doing so, it lowered my already dinged credit score. Time was on my side though. I chipped away at the debt with all I had and with each month my score rose. I had always made all of our payments on time so in addition to paying off each card, my score eventually climbed back up to where it was. Jump forward just a few months ago when I was in need of buying a car. I was grateful my score had recovered to qualify for not only the loan but the lowest interest rate.
Rebuilding or building your credit after divorce is doable. It’s not quick but it can happen slow and steady. Here are just a few things to limit or spread out if you can:
Running your credit – don’t go apply for a bunch of credit cards all at once.
Closing cards – the same thing happens when you close cards. Spread out closing cards if at all possible.
Applying for loans (home or auto)
Late payments – avoid
Remember, you may need to apply for an auto loan or get a credit card to manage incoming debt but when possible don’t get in a rush and talk it through with a trusted friend or advisor. There may be other options out there you didn’t think about. Each step of the way, pray about it. Give it to God to help guide your steps.
When you are in the middle, you can’t see the way out at times. Hang in their friends! There is a light at the end of the tunnel. Your life will rebound, credit score and all, in due time.
Blessings friends, Jennifer