Divorce and your finances: how to build your credit rating and organise your money now you’re single

What do Bill Nighy, John Cleese and Ronnie Wood have in common? They all got divorced in their 60s. It’s not the cheeriest factoid – but the divorce rate among over-50s has increased by a third in the past decade, according to relationship counselling charity Relate.

For some people, a divorce is a release from an unhappy marriage and a chance to start again; for others, it can be a life event that causes immeasurable sadness and knocks the stuffing out of them. But regardless of the reason, divorce can have a severe impact on finances.

In many cases, it’s women who find themselves on the back foot financially after a divorce, as they are more often the partner that halted their career to look after the children. Their pension pots could look a lot smaller than that of their male spouses.

It’s not a given, though, that men will find themselves unscathed financially after a divorce. In most households today, women work and contribute to the home’s coffers, whether that’s paying part of the mortgage or some other account or bill (and it’s not unheard of that in some 50-plus couples the wife is the bigger breadwinner).

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Prepare to focus on your finances for six months to two years

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A divorce changes the amount of money each partner has at their disposal, and it can have a radical effect on a person’s credit rating.

There are no quick fixes to re-establishing your finances after a divorce but putting a strategy in place will go a long way to helping you get back on an even keel. Prepare to focus on your finances for at least six months to two years.

Open an ordinary savings account

If the home was run on a joint bank account while you were married, you now have the task of establishing yourself as a single person in the eyes of any bank. Doing this is not necessarily difficult, but it is time consuming.

Open up an ordinary savings account, at a bank or credit union, and make regular deposits, even if they are modest.

Also read: Are  you giving your children too much money?

Put this account in your name alone and don’t withdraw from it. Ultimately, this account will become your emergency fund, which you can fall back on if ever you find yourself in a bit of a jam, but for now its purpose is more to give a stable record of your financial status.

When you come to apply for credit, you’ll be asked to provide three to six months of bank statements and here’s where this savings account and your regular deposits will stand you in good stead.

Open an account to pay bills from

At the same time, open another account from which you will pay your bills. Being the account from which you pay for things, it’s acceptable to make withdrawals from this account. But don’t ever empty it of every penny and always have enough funds available to cover direct debits.

Establishing a good credit history is one of the best things you can do for yourself post-divorce as the time may come when you will want to secure a loan for a big ticket item.

Also: Should you take your pension fund as one lump sum?

Applying for credit

To get to that point, start off small. Once you have a few months under your belt of making deposits into your savings account, think about applying for a store card or a credit card.

Make sure you keep up with the payments on these cards, as the point of this exercise is not really to purchase things but to show that you are a responsible person who is worthy of credit.

A word to the wise: apply for one line of credit at a time and wait a considerable period of time before applying for the next one, as applying for too many at once will flag up against your name – and not in a good way.

End all financial connections with your ex

Finally, remember to cut all financial ties with your former spouse, even if you have settled into an amicable friendship after the divorce.

Keeping joint loans and credit cards can be risky as you are both responsible for the whole debt. Likewise, you should close any joint savings accounts and split the assets.