How Divorce Impacts Your Credit Score And How You Can Fix It

How Divorce Impacts Your Credit Score And How You Can Fix It

Whether it’s on friendly terms or not, divorce is stressful, and it can even take a considerable toll on your finances. This means you’ll likely hear phrases such as “100% liable for bills” and “child support payments” as well. In this post, we’ll go over how divorce can impact credit scores and how you can repair your credit.

How Divorce Impacts My Credit Score

Your divorce doesn’t directly impact your credit score or credit results, but the financial issues that come afterward can certainly impact it.

Here are some factors that can cause your credit score to decline:

Your Debt Racked After The Split Up Because Your Ex Was An Authorized User On Your Credit Card

This is quite the common thing with non-friendly divorces. If for instance, your ex is being spiteful, they could try to punish you by using your credit card in order to make large purchases in your name or by accessing your bank accounts.

However, since your former spouse is an authorized user, they can do this legally. What’s more, is that they’re not liable for the payment. To be frank, they can spend as much money as they want to without bearing the consequences for it.

Your Joint Accounts Are Unpaid

Married couples usually have joint accounts. Both and your spouse may share a credit card, mortgage, car loan or other forms of debt. The debt doesn’t go away even after separation because you both are still responsible for paying it off.

Paying For Bills Will Be Tough

It’s no secret that life after divorce is a tough one. During that time, you may experience trouble trying to keep up with all the bills you have stocked up as well as paying for living expenses, especially if your ex was the main breadwinner.

As a result, this damages your credit score if there are any late or missed payments. Because your credit history is the most important factor of your credit score, it would be wise of you to make the payments on time, every time.

divorce credit score

Using Your Credit Card To Pay For Costs

If you’re using your credit cards to substitute as means of income – or lack thereof – you could likely end up with a lower credit score. You must ensure that your credit utilization ratio is less than 30%.

With that in mind, paying for legal expenses with your credit card could also affect your credit score. Although every divorce comes with fixed costs, like filing fees, other costs may wildly vary. The fees of the lawyer depend on the condition of your case and the degree to which the issues between you and ex can be contested. For example, if you’re dealing with property or custody disputes, the divorce might cost thousands of dollars and sadly, most people don’t have that kind of cash at hand.

Your Credit Limit Has Decreased

Most of the time, creditors can decide to lower your credit card limits. This may happen once the accounts of you and your former spouse have been separated, especially if the creditor discovers that you’re making much less money now.

Fortunately, there are a number of ways for you to protect your credit score after a divorce.

How to Fix Your Credit Upon Separation

You need to be proactive about your credit score, as it’s not necessarily going to be there during your divorce. This way you can protect your money and make it easier to start your new, independent life.

Here’s what you should do to fix your credit score:

  • Separate all joint accounts: As soon as you’ve confirmed that you’re getting a divorce, either close your joint accounts or switch them to individual accounts immediately.
  • Determine which accounts were shared, according to your credit report: Read each and every line of your credit report for any mishaps and find out which accounts you’re either partially or fully responsible for. It’s actually quite common for spouses to open accounts in their partner’s names.
  • If your spouse has access to your account, remove their authorization: If your spouse does indeed have access to a bank account or credit card that is solely in your name, then remove them immediately to protect your finances.
  • Change your security information: Improve the security of your credit and debit cards by changing their PIN code, as well as the password on sites and apps that link to your bank account. You can also change the security questions so that your spouse doesn’t easily guess them. And if you have moved, change the address so that your credit reports and bank statements are delivered straight to your new location.
  • Change your lifestyle to match your income: Most divorcees – especially those who relied on the income of their spouses – struggle financially to maintain their lifestyles. If this is so, then you may want to cut back on the spending. For instance, you should consider moving into an apartment, get rid of your cable, and also sell your car for a less expensive one. The best way to know what you can and can’t afford is to make a budget. Give greater priority to your most important expenses and try to stay ahead of payments that could directly affect your credit score, like credit cards and loans.
  • Work out an agreement about joint debt payments: Try to work out the specifics of joint debt payments, with or without the help of a divorce decree, and then get it in writing.
  • Keep a check on your ex’s payment due dates on joint accounts: If your former spouse doesn’t pay on time, you can make the minimum payment on your joint account and save your credit score. Later, you can report the non-payments to the courts and get your money back.
  • Boost your income: During your divorce, you should prioritize earning more and spending less. Besides lowering your expenses, you can earn more money by either working overtime or do some freelancing on the side.
How Long Does It Take To Repair My Credit Score?

How Long Does It Take To Repair My Credit Score?

Having good credit is essential if you want to obtain a loan for a house or a new vehicle, open a credit account at a retail store or even get a cell phone contract. Even some employers look at credit scores when determining whether or not to hire an applicant.

According to Experian, it’s estimated that 30% of Americans have poor credit, bad credit, or no credit at all. When speaking of credit scores, most reporting agencies use a model that scales credit from 300 to 850, and the cutoff for what’s considered to be bad credit is anything below 499.

Most people need credit at some point in their lives, so it’s essential that you keep your credit score above 661 if you want the benefits of being able to get a loan or open a credit account.

In this article, we’re going to look at what causes your credit score to go down and how to fix it.

What Determines A Credit Score

It’s easy to fall into bad habits and find yourself behind when trying to keep up with your credit score. So, how does one get bad credit? Well, let’s take a look at the factors that go into determine your score.

  • Late Payments — 35% of your credit score is determined by your payment history. In fact, it’s the most important factor in determining your credit score. If you’re consistently late with payments, your credit score will remain in the ‘bad’ range. Also, note that bankruptcies and charge-offs fall under this category too.
  • Amount Owed — This represents 30% of your credit score and it includes the amounts you owe on each individual account as well as the total amount you owe in relation to the amount of credit you have.
  • Credit History — 15% of your credit score is your credit history or how long your accounts have been open and active.
  • New Credit — 10% of your score is determined by any new accounts that have been opened and the number of inquiries that have been made to your credit history.
  • Types Of Credit — 10% of your score is made up of the varying types of credit you carry; it looks better on your report to have a few credit cards, an installment loan and a mortgage rather than having all of your credit tied up in credit cards.

Credit Score Repair

How To Fix A Poor Credit Score

Now that we know what goes into your credit score, we can look at how to set it right.

The first thing to do is to get hold of your credit report and monitor it. You can do this if you have a smartphone by downloading an app that lets you view and track your credit. Most of these apps will even alert you any time you have a change in your score so it’s a good idea to start there, because you can’t know where to go if you don’t know where you stand.

Once you’ve seen your credit score and determined it’s in need of fixing, you can set about doing that.

Now that you have your credit report, check it for inaccuracies and dispute anything you see that’s not right. You can dispute these errors you find online, and while there’s no guarantee you’ll be successful, there’s no reason you shouldn’t try.

The first step is to get payments up to date and make them on time; this is the most important step you can take and you must be vigilant. Set up autopay or reminders if you’re forgetful, make sure every payment is made on time.

The next thing you have to do is to work on getting your debts paid down quickly; that may mean paying more than your monthly payment, but whatever you have to do, pay off your balances as soon as you can, starting first with the accounts with the highest interest.

Another thing that can help is getting another credit account. We get it, you’re trying to get out of debt, not go deeper in! But here’s the trick. If you open a new account, but don’t carry a balance on it, that increases your credit to debt ratio, and will improve your score.

How Long Will It Take?

The good news is that bad credit isn’t forever. If you follow the steps outlined and use credit wisely, your credit score will improve. The short answer to how long it takes is: it depends. It depends on how low your score was to begin with and what kind of negatives you had. But you can expect the process to take anywhere from six months to a year. The key is to be patient and keep monitoring your score every month to see the progress.

How Do Late Payments Affect Your Credit Score?

How Do Late Payments Affect Your Credit Score?

Unless you’re independently wealthy, chances are you will to have to purchase things on credit now and again. And, if you don’t have a good credit score, you’ll have a much tougher time getting loans for things like buying a house or a vehicle or getting a credit card.

So, it’s essential that if you want to enjoy many of the things that life has to offer, you’re going to need to have a good credit score. Traditionally, a credit score above 700 is considered good and means you’re more likely to be approved for loans and credit cards with favorable interest rates than if you had bad credit.

There are a variety of factors that go into your credit score, including:

  • Payment History
  • The Amount You Owe
  • Types of Credit (i.e. loans, credit cards, retail accounts, etc.)
  • Length of Credit History

However, of all those factors, payment history is the number one factor that affects your credit score.

In this article, we’re going to look at how late payments affect your credit score and how to improve your credit score.

Late Payments and Credit

It can’t be overstated that late payments are the number one factor to affect your credit score, and according to Equifax “If you miss a payment on one of your credit accounts, be it a credit card, mortgage, or other loans, you could see your credit score drop.”

Keep in mind that each credit reporting agency is different in how they score, but all of them take a negative view on late payments.

Now, while a late payment will ding your credit score, it’s not all gloom and doom. Credit reporting agencies look at several factors in regarding late payments, such as how late, and if you have a history of late payments. For example, if your payment is 90 days late, it will be a bigger black mark on your credit score than if you’re only 30 days late. Keep in mind that the longer your bills go without payment, the worse your score will get, so it’s vital that if you do miss a payment, you make it as soon as possible. Missing a payment by one or two days won’t hurt as much if at all.

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How Much Of A Drop Do Late Payments Cause

Again, it depends on how late the payment is, but in general, according to “A recent late payment can cause as much as a 90-100 point drop on a FICO Score of 780 or higher.” That much of a drop is enough to pull you out of ‘good credit’ range and into ‘fair credit’ range, which then makes it more difficult for you to get credit in the future until you get that score back up.

It’s also important to keep in mind that the better your credit is, the more likely you’re going to feel the negative impact of having a late payment on your credit score.

How To Fix Late Payment Credit Scores

The first thing to do is to keep track of your credit. It’s easy to do if you have access to a smartphone. There are many apps you can get that will help you monitor your credit score and alert you when a lender makes an inquiry to your credit or if you have a rise or drop in your score. You should always know where you stand so you know where you have to go.

Once you know what your credit score is, you can begin to take steps to improve it. The most important thing is to become obsessive about making your payments on time. And one of the best ways to do this is to sign up for auto pay with your accounts. Auto pay means you authorize your lender to deduct funds from either your checking or savings account when it’s due. This is by far the best way to ensure that your payments are on time.

If you’re concerned about security or don’t feel comfortable authorizing creditors access to your accounts, you can set up reminders for each bill to tell you that it’s due and that it’s time to pay. Again, if you have access to a smartphone, there are a variety of reminder apps available that will help you keep your bills paid on time.

Another trick is to make your payments on a weekly basis. Some people find the monthly payment too much, so making smaller, weekly payments will keep you up to date and not drain your account so quickly.

It’s not uncommon for people to be late with a payment now and again, and while it will negatively affect your credit score, you can fix your credit by getting and staying on time.

First Time Home Buyer? Where Do I Start?

First Time Home Buyer? Where Do I Start?

Considering buying a home?  Wondering how to get started?  Or when to start the process?  You stomach gets all tight just thinking about purchasing what could be your biggest financial investment to date.  Understanding the process and having a plan may remove some of those butterflies.  The biggest key to a successful stress reduced transaction is to start early and reduce the chances of last-minute surprises.


Up to 1 Year Out from Purchase

  1. Check your credit report. If you have items on your report the earlier, you tackle the issue(s) the more time there is to raise your credit scores.  You can check your credit for FREE through, the only free online credit report authorized by Federal law.
  2. Check your FICO credit score. The FICO score indicates your creditworthiness and determines your interest rates and terms of the loan.  The higher the FICO credit score the more options are open to you as a buyer.
  3. Reduce your outstanding debt. Get your outstanding debt (Credit Cards & Store Cards) below 30% of the approved limit on the credit account and if possible, get it down below 10% of the limit.  Be sure you are paying on time and early if you must use the card, to keep it below these levels before reporting date.  If you have a large number of cards and balances you might want to meet with a credit counselor, like Joe Camacho with Phenix Group to get a plan together.
  4. Saving! The higher the down payment you have the more options you have with mortgage companies.  So, start saving what you will need now.  You will need to prove you have had your down payment balances in your account’s months in advance of closing as proof of funds.

The above-mentioned items may mean a change of your spending patterns.  You are going to want to look at cutting back on frivolous expenditures, expensive vacations and forgo luxury purchases at least until after closing.  It is so sad to see someone do all this hard work, get approved for their dream home then go out and make a last-minute purchase of furniture or a vehicle.  Then no longer be able to qualify for their home loan.  It unfortunately happens more than you would think.


Around 6 Month Point Prior to Purchase

  1. Start researching you mortgage options. There are many different types of mortgages and first time buyer programs.  We will expand upon these programs in future articles.  Do research and find out the risks that can incur with different types of mortgages?  At this point, you may want to sit down with a FREE consultation with Real Estate + Credit Professionals.
  2. Look into Typical Unforeseen Home Ownership Costs. These can include, but not limited to, Homeowners Associations (HOA) fees, Home Warranty Products, Special Assessment Zones, and Utilities Rates to name a few.
  3. Recheck you credit status and scores. Have you made the progress you need to qualify for a mortgage?  If not, you will need to kick you credit repair into overdrive.  At this point, you need to consider hiring a credit counselor, like Joe Camacho with Phenix Group to assist you getting to the scores you desire.


3 Month Point – Critical Credit Period

  1. You will need to reduce credit usage. FICO score is affected by how much of your available credit lines you have outstanding.  Learn when your credit provider reports balances outstanding on your card to the bureau.  This typically, does not correspond with your debt’s payment date.  Try to pay down any balances before reporting date.  Keep your balances below 30% and as close or below 10% if possible.
  2. It is very important at this point to not open or close any accounts. You are now close to starting the home buying process and these steps can have a serious impact on your credit scores.  This is critical to remember even after you have a letter from your mortgage lender qualifying you for a home mortgage and up and to and including closing the transaction.
  3. Begin researching neighborhoods and real estate agents. What is considered a great neighborhood is going to be the items important to you like; distance to work, good schools, shopping, parks, activities and great amenities.  We are adding this suggested task at the 3-month period, but nothing wrong about starting this process much earlier.


The “Home” Stretch – 2 Months Out

  1. You need to be very cautious during this period in having your credit pulled for any type of financial transaction. You should have considered the different mortgage options out there already and only have a limited amount of mortgage companies pull your credit report.  However, if you are shopping mortgage companies do them in a short period of time and they will be counted as one pull
  2. Check mortgage rates and programs like 1st time buyer assistant programs. Know you FICO score to get mortgage rates, they don’t have to pull your credit to discuss rates with you
  3. Once you have selected your mortgage company you want to get pre-qualified for a mortgage. This way you know how much you can afford. Plus, you will need this letter for your agent to submit offers for you.  The seller wants to know you can afford to purchase the home for purpose of reviewing and accepting the contract.


You should now be prepared with a better credit score, larger down payment and information on mortgages to go out and find your dream home to make a confident offer on!  Good luck out there.

By: Bryan Shobe, JB Goodwin REALTOR®

Website: Real Estate + Credit Professionals

This information is Provided by: Bryan Shobe, JBGoodwin REALTOR®, Direct Line: (210) 753.4110 E-mail:, Texas Real Estate Salesperson License #701379. Texas Law requires all real estate licensees to give the following information about brokerage services: Texas Real Estate Commission Information About Brokerage Services:

5 Ways Credit Impacts Your Wallet

5 Ways Credit Impacts Your Wallet

Whether you like it or not, your credit is a reflection of you. It’s basically a snapshot of how trustworthy you’ve been with money in the past. Throughout your life, credit can affect many different milestones such as getting a job or an apartment. Also, when you choose to make bigger purchases such as a car or a home, credit can make or break whether you’re going to be willing to afford it. It’s important to realize how important credit before you can work on increasing your score as much as possible or look into credit repair. To learn more about how credit impacts your wallet, read on.

1. Your Rent

More and more apartment managers, landlords, and rental agencies review their tenants’ credit scores. When they look at your credit report, they are trying to find a record of fiscal responsibility (or lack thereof.) Negative information like missed payments can influence them to believe that you may not pay your rent on time. They might be looking to see if you have any large debts as well, which may prevent you from paying your rent. Having a low credit score means that you might have to find a co-signer, put down a larger deposit, or that your housing application might just get passed on altogether. Causing you to settle for an area that you’d rather not live in or pay more than you were planning to for rent.

2. Your Utilities & Cell Phone Service

As with your rent, having a low score may force you to have to get a cosigner or pay a large deposit on your utilities. Cell phone providers might ask to take a look at your credit history before giving you service. Also, if you have a lower credit score, you might miss out on deals that individuals with better credit scores are being offered.

3. Your Career

Even though you may not think it’s fair, the truth is that many employers check the credit reports of prospective employees as a part of the screening process. Some of the reasons why include assessing trustworthiness, discipline, and figuring out the potential for theft or embezzlement. It’ll often happen if a person is going for a high-stakes position, or if someone yearns to be in an industry that deals with money quite a bit (i.e. banking.) But, in the end, it’s a possibility that many people will face when they’re trying to get a new job.

By law, employers are required to have your written consent before they look at your credit history. And also, they might not see your actual credit score. In turn, they’ll see a modified credit report that could omit some details. Still, if your credit report involves a number of negative factors, it may be the thing that stands between you and getting the job that you have always wanted.

4. Student Loans

If you’re looking to continue your education, then finding a student loan might be a frustration instead of an ease. But, this depends on a couple of different factors. When you’re dealing with Stafford, Perkins, or PLUS loans they don’t rely on your credit score. But, if you’re planning on getting a PLUS loan, it requires that you don’t have an “adverse credit history.”

Private student loans are a completely different story. They, in turn, do look at your credit score when deciding whether to give you a loan or not. When it all comes down to it, the borrowers with the worst credit are going be offered loans with 5-6% more of interest than those with an excellent credit score. Sometimes, the rates are even higher depending on the lender. This means more money is going to come out of your pocket in the long run than someone who has already established an excellent credit history.

5. Your Mortgage or Car Loan

If you’re currently in the market for buying a house, one of the first things that you’re going to do is apply for a mortgage loan. If you are dealing with a terrible credit score, then you might not even qualify for getting any type of mortgage loan at all. Many lenders use your credit score as proof of your reliability as a borrower. If you’re dealing with bad credit, that’s definitely going to be a red flag for a lender that they might not get their money back if they lend to you. Even if you don’t have an established credit, you might not get a good deal for a loan as well because lenders are basically taking a bet on you.

Even if you do get approved, the loans that are available to you will probably have high-interest rates. In the long run, you’ll probably end up spending tens of thousands of dollars more than someone who has a much better credit score than you.

Car loans work the same way. If you don’t have a decent credit score, then you might not even have car loans available to you. If you do, you’ll probably end up drowning in interest for years to come. Having bad credit can not only stand in the way of your goals, but they can also cost you thousands of dollars in the long run due to interest.

The status of your credit can affect your wallet in many different ways. It can come between you and many of your life’s goals including getting a job, getting an apartment, and qualifying for an auto loan. Also, your credit can cause utility and credit card companies to see you as “untrustworthy” and keep the best deals from you as a result. Choosing to start building your credit means, inevitably, choosing a better life for yourself. Having good credit gives you the ability to choose the things that you want whether it is your job, your place to live, or your car. Choose today to work on bettering your credit, and give yourself the gift of choice.

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Hard Inquiry vs. Soft Inquiry: What’s the Difference?

Hard Inquiry vs. Soft Inquiry: What’s the Difference?

There are many intricate details that build your credit score. This includes the amount of new credit that you receive, the amount you currently owe, and your payment history. But, another factor that goes into your overall credit score is the number of times that it’s checked by specific institutions. Credit checks are put into two categories: hard inquiries and soft inquiries. It’s important to know how each type of inquiry affects your credit so you can have more control over your credit score as a whole.


Hard Credit Inquiries

Hard inquiries (often known as hard pulls) happen when someone is trying to decide whether to loan money to you or not. They are supposed to happen with your consent only. When you’re trying to apply for a student loan, an auto loan, or a home loan, credit checks from these affiliates companies will stick to your credit report. These credit checks do affect your credit score and can take off as much as five points from your FICO score. Mostly, they’ll have a minor, if any, effect on your credit score. Hard inquiries only stay on your credit score for about two years, and they often stop affecting your credit score after one.

If you’re trying to shop around for a credit card or a student loan, it’s best to not procrastinate and only apply for credit cards that you think you’ll receive. All those inquiries within a 14 to 45-day period are considered one inquiry on your credit report. So, if you’re looking to shop around, be sure to stay smart during your journey. But, having an excessive amount of hard inquiries might make you seem high-risk to lenders. Don’t let these facts keep you from shopping around for the lowest interest, but also don’t go crazy with your applying. Also, keep in mind that FICO gives a 30-day grace before loan inquiries are affected in your credit score. If you can minimize the number of hard inquiries that you have on your credit report, then it’s a good idea to do just that.


Soft Credit Inquiries

On the other hand, soft inquiries (or soft pulls) don’t affect your credit score at all. They’re utilized for a variety of different reasons often without your permission, including when credit card pre-approve you for loans. It wouldn’t be in their best interest to waste postage on a person that they would probably not accept, so they check their credit. Also, when companies do background checks, soft inquiries happen as well. Companies might check your credit as an indicator that you’re a responsible adult with good habits. Also, when you check your own credit score it doesn’t affect it at all. It’s often a common misconception that checking your own credit score will lower it, but that’s just not the case. Whether you’re getting your free yearly credit report from any of the credit bureaus or using an on-demand service like Credit Karma, they’re all recorded as soft inquiries. These types of inquiries might be included on your credit report, but that often depends on the specific credit bureau. You can check your credit score as often as you’d like.

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Hard or Soft Credit Inquiries: More Information

There are certain situations that could involve either a hard inquiry or a soft inquiry. They include leasing a car, opening up a utility account, requesting a higher credit limit, and more.

If you’re not sure whether a credit check is going to be recorded as a soft inquiry or a hard inquiry, then it’s important to get in contact with the lender or financial institution. Being informed with it comes to your financial history is very important. Also, if there’s a hard inquiry on your report that you didn’t authorize you can get in contact with them and ask them to remove it. If they aren’t budging, then you can dispute them directly with the credit unions. It’s very important to keep the information on your credit score as up-to-date as possible to get the most honest report.

To best protect yourself against the effect of hard inquiries, it’s important to maintain a solid credit score in order to minimize the effect that a hard inquiry would have on your credit. Also, ask them if you can do a soft inquiry instead. It might be just as effective for you to pull on your own credit report, print it out, and show them instead of them doing a hard inquiry on your own.

Hard inquiries and soft inquiries are very different, but they’re both important to know when it comes to your credit. Hard inquiries happen with your consent, and they often affect your credit score in some way. Soft inquiries often happen without your permission, but they don’t affect your credit score. Knowing these two separate concepts gives you the best chance of taking control of your credit score and staying as fiscally responsible as possible.