Dealing with the Effects of Divorce when You Need a Loan

nrnThe effects of divorce can go a long way toward making your future unstable or secure. If you fail to make payments on time or are saddled with a substantial amount of debt following a divorce, it will inhibit your ability to obtain a loan. When you have borrowing power your future is much more secure, and it means you can obtain the things you need when you need them including a new car. All of these things are important if you are walking from a relationship that included two incomes or even if you never had any worries about having the things you needed when you needed them. rnIt's important to keep in mind your borrowing power can be restricted by several different factors. Some of the more common factors include the following: • High income to debt ratiorn• Lack of credit experiencern• Low credit scorern• Poor creditrn• Lack of collateralrn• All credit accounts too newrnWhile there may be other reasons as well, these are the most common ones that may affect your ability to borrow. The other thing to remember is while you may have credit with your spouse, if you do not have credit experience on your own following your divorce, it may affect your ability to obtain individual credit. The effects of divorce can go in both directions: negatively and positively. Of course, some of the reasons above show that the joint credit you had with your spouse might have had no lasting effects on your credit report. rnWhat about negativity? Shouldn't it remain with the person who was ordered to pay those debts? While it does seem that a court order should replace a contract it doesn't work that way. As long as the ex-spouse makes the payments on those debts, no one will come after you for the payments. On the other hand, as long as the loans or credit cards remain open, it will affect your debt to income ratio as well. rnIs there an easy way to overcome the effects of divorce when it comes to credit? One of the best ways if it's possible is for each party to assume the debts for which they are responsible. In other words, if your husband is supposed to pay all the credit card bills, he should apply in his own name and use those funds to pay off the others thus relieving you of the responsibility. Unfortunately this doesn't usually happen because the other spouse knows as long as your name is on the accounts you will make every effort to make sure the payments are made. rnThe key to dealing with the effects of divorce and how it affects your borrowing power is to begin immediately by establishing credit in your own name. Of course, if you made it a point to have credit in your own name while you were married you will find it much easier to continue building a credit history and borrowing money when you need a loan.