Establishing your own Credit after Divorce

    While you were married, chances are your credit cards, car loans, mortgages and other types of financing were established as joint accounts between you and your former spouse. Perhaps some accounts were also set up exclusively in your name or your ex’s name. Now that you’re officially single (or about to be), it’s essential that you establish or re-establish your own credit.          

Your credit score will contribute to your ability to obtain new credit, plus determine how much you’ll pay in fees and interest rates. Right now, your credit score is somewhere between 300 and 850. While each of the credit bureaus calculates your credit score using a proprietary formula, the actual score that more than 70 percent of all creditors and lenders pay attention to is your official FICO score. This is the score calculated by Fair Isaac Company. It’s based on information within your three credit reports (compiled by Equifax, TransUnion and Experian).                    

According to Fair Isaacs, the national average FICO score is 723. Someone with a credit score below 620 is considered to have poor credit. A credit score between 621 and 720 is considered average, while someone with a score between 721 and 850 is considered to have excellent credit. Because they pose little risk, people with above average credit scores are the people who receive the best interest rates and lowest fees when applying for new loans, credit cards or financing.                    

Your credit score is calculated using a complex formula that’s based exclusively on information that appears within your credit reports. Six of the key factors that go into computing your credit score include:   

• Your payment history and whether or not you have paid your bills on-time in the past.  About 35 percent of your credit score is based on whether or not your creditors have reported late or missed payments on credit cards, car loans and mortgages, for example.  
• The amount of money you currently owe. This includes credit card balances and outstanding balances on other types of loans.    
• The length of your credit history. The longer you’ve maintained a good relationship with your creditors, the better. Thus, it’s important to keep older accounts that are in good standing open, even if they’re not currently being used.