During the period of a divorce, your credit score is vulnerable to self-inflicted damage, mostly due to scared thinking, not thinking at all, or even rushing into decisions. The following illustrates six seemingly minor actions which can cause major harm to your credit score, often prolonging your inability to get credit approval, job acceptance, and insurance.
1. Close credit accounts with small balances
It may seem silly to keep accounts that you only use once in a while, but by closing small balance credit accounts, you reduce the notations of credit capacity that you had before. You also reduce your available credit opportunities. It is much easier to use an existing account than to get a new one. In addition, longevity of an account positively impacts your credit score because it is proof of your creditworthiness.
2. Change your mailing address more than once during a year
One of the factors in a credit score is stability. Creditors want to know that they can get in touch with you when they need to without extra expense. Letters that come back “addressee unknown” send up a red flag. If you are not sure of your residency status, use a family member’s address or get a mailbox. There are establishments like Mailboxes Etc. or you can try the local post office.
3. Pay off credit cards as quickly as possible
Paying off a credit card as quickly as possible is a good bookkeeping decision, but not a good credit decision. It is better to maintain a small balance rather than no balance at all. Making even a minimum monthly payment reassures your creditors that you are responsible and trustworthy. Build a credit reputation and you will have an easier time getting more. Keep a running bill by charging something you would normally pay cash for, to preserve your creditworthiness.
4. Keeping your name on a joint account
Get your name off joint accounts as quickly as you can. By keeping your name on a joint account, beyond the original date of conflict, you are agreeing to be responsible for expenses you have no control over. Somebody who is out to hurt you can use this to punish you. Open your own account and be in control of your own money. There are some people who cannot open an account because of a bad credit history. When you go to apply for an account, they run your name and all information through a screening service, in an effort to keep people who bounce checks, etc. from opening a new account and doing it again.
5. Opening new joint accounts
Be very selective and screen anyone who might be willing to open an account with you. Keep in mind that the number 1 perpetrators of identity theft are family members.
6. Adding your name to someone else’s account
Credit accounts include savings, checking, and credit cards. Any account that you are opening at a financial institution or Chexsystems is a credit account. One of the common reasons for adding your name to someone else’s account is: “That’s where I cash my checks.” If you have proper ID, you can cash your checks almost anywhere. (If you don’t have proper ID, keep your eye out for a future blog post.)