Table of Contents
Credit Repair and Divorce
Credit repair, and removing debt from a credit report can be important in a divorce. In this video Margreit McInnis from Equity First Consultants, 631-714-4822 discusses credit repair. It is very important to go through a credit report line by line to determine what the charges are, the age of the charges, and whether they are valid or not.
Also, one of the first steps in credit report is to determine if the charges are legally on the report. Items that have been paid off, but are still showing on the credit report will need to be fixed. Then the next step will be to establish a positive credit history. The important takeaway is that credit repair can be vitally important to settling a divorce.
Here’s the transcript of our conversation:
Introduction
Gary Port
Hi, Gary Port with Port and Sava and N Y Divorce Facts, and I’m here with Margreit McGinnis from
Margreit McGinnis
Equity First Consultants.
Gary Port
We’re gonna be talking about both divorce and the wonderful world of debt credit repair. Now, divorce, unfortunately, is not only about downsizing. But it’s about dividing things and some of the things you have to divide are gonna be debt.
And sometimes you need to get rid of debt in order to get other things in the marriage. So, for example, some people wanna buy out their spouse in the house, but they may have some problems with their credit. So from time to time, I have to deal with credit, repair companies who will help us get our clients to where they need to be.
And I thought it’d be a great idea to have Marguerite come in here to discuss what she and her company can do to help you guys get on with the rest of your life. So let’s talk a bit about debt credit repair.
Margreit McGinnis
Okay, what we do we call credit and financial solutions. What that means is, credit and things around credit could be establishing, re-establishing, and removing negative items. Basically, credit repair.
And financial could be helping clients kind of get to the next step of getting to the equity of their house rich cash poor, buying. One spouse or the other buys each other out, or even everybody sells the property and then everybody downsizes or splits out.
Gary Port
Yep, credit repair. As I said, a big issue in some divorces.
Credit Repair – The Basics
Margreit McGinnis
Yeah.
How do we repair credit if someone’s credit is messed up and we are now in a position where one spouse wants to buy at the house but can’t do it.
Right, right, right. Okay. So the first thing that we do is, aggressively go line by line through our client’s credit report and then we identify where, you know, what’s dragging the score down. So if we have a lot of debt or debt that needs to be settled out, um, sometimes we have to put that to the side first and look at negative reporting.
So the negative reporting, late payments, derogatory status, old collections, even those that were paid off. Still, be reported as negative on a credit.
Credit Repair – The Negative Charges
Gary Port
Okay, so we’ve got these, these negative charges. How do we remove the negative charges?
Margreit McGinnis
Well, the first thing we look at is we go through a verification process.
We always work directly with the creditor and so by doing that, we verify the dates of the last activity. We validate that it’s even correctly in the client’s name. It’s adhering to all consumer laws. That’s the first thing that we do. The next step is working with the creditor. If it’s an old collection, um, you know, couple years, three years, four years, it might be paid off, but it’s still showing up as a derogatory item on credit.
We would work with the creditor to get them to remove it. And delete it from credit. So it’s, it’s late payments, it’s account status. And then when we, sometimes there’s negative reporting that gets verified, which means it’s within the statute of limitations. It’s not violating any consumer reporting laws.
So then we have to look at other things like establishing new credit. Trying to build up the good side of credit, because some of those negative items we were not able to remove. So with credit repair it really depends and it’s a very case-by-case situation.
Credit Repair and Bad Credit History
Gary Port
Okay. So when we take a look at this bad credit history and it’s impact on credit repair. The goal then is to basically parse out the derogatory stuff, the stuff that’s old, the stuff that maybe negotiations can occur seems to pull it all off. Mm-hmm. . So. Alright, so let’s, let’s, well take a sort of a typical Situation. Uh, one spouse wants to buy out the other on the house. Now, I love buyouts because we don’t have brokers fees involved, we don’t have closing costs, and there are no capital gains taxes.
It’s a, it’s a win for the, uh, for the party who’s walking away. But the party who’s taken the house, they’ve gotta get the mortgage to buy out the other person.
Margreit McGinnis
Right.
Gary Port
And they gotta get the right interest rate.
Margreit McGinnis
Correct.
So now we’ve got someone, lets say they make about 70, $80,000 a year. They may be getting about another 20,000 in child support payments.
They’ve got some because of the divorce. Both parties were at fault here and we’ll say that they both screwed up their credits.
Okay.
Credit Repair and Pulling up The Credit Score
Gary Port
Sot their credit scores are dropped maybe to about 500, maybe 600.
Credit Repair should pull this up? How do we do that so this spouse can buy out the other spouse?
Margreit McGinnis
Well, again, for credit repair we would, we would first identify some of the derogatory payment history. Anything that we can remove because of some of the outstanding debt. The person, either party, may not have the cash on hand mm-hmm. to settle out that debt. So the first step in credit repair is going for the derogatory, the bad payment history, um, talking to clients about budgeting, staying within that 30 day grace period window.
Because they’re not allowed to report you late unless you’re 30 days or more past the due date. So sometimes they can, they’ll charge you a late fee if you’re 10 days late, 15 days late, but they can’t report you late to the credit bureaus until you’re 30 days.
Gary Port
Okay.
Changing Behavior in Credit Repair
Margreit McGinnis
So some of its behavior. So we retarget that.
We would, I mean with a 500 score, you’re not going to qualify for a home equity line of credit. You’re not gonna qualify for, you know, refinancing or, or buying the other person out. Sometimes we have to go in steps. So for instance, if both parties are able to cooperate with each other and let’s work on both their scores to get them up, at least to the point that they could borrow equity, then settle debt, then buy the other apps.
And that’s sometimes it’s multi-step.
Tying Together Credit Repair and Divorce
Gary Port
Okay. And that’s where I come in with the divorce lawyer. Mm-hmm. Cuz I will put in the agreement saying you. Five months, eight months, 10 months, two years to buy out the other party.
Margreit McGinnis
Correct.
Gary Port
And during that period of time that we’ve set forth in the agreement, you are working to get them to where they need to be.
Margreit McGinnis
Exactly.
Gary Port
So when the date. that spouse can do the buyout.
Margreit McGinnis
Yeah. And it, and it is best for everybody. If both of the parties are having credit issues, we really should be working on both at the same time. Because even the person who’s getting the money and buying out and walking away, they’re gonna have to rent or buy something else.
So if their credit is in question and need ofcredit repair it’s important for that person too, because most likely there are children involved. Children will have to go from one house to the other, whatever. Everybody needs proper space for kids. So, um, so it’s really important to work on both, both parties.
Gary Port
So it, it, it’s very clear then in, in a divorce, one of the things that we have to worry about in addition to who gets the house, who gets the kids, is we also have to plan and, and basically in a mature, calm fashion.
Margreit McGinnis
Yes.
Gary Port
Both parties should work together to try to get the re the credit issues repaired cuz it’s in both of their interests.
Margreit McGinnis
Correct. And having been through a divorce myself, I know that it is really a significant deconstruction of life. Not certainly where everybody’s set out to be when they get married. And it can be really, really difficult to get to that middle ground. When there’s so much resentment and anger and hurt and emotions involved, but we have to try, try, try, try to grab our grownup, um, ribbons off the wall and wear them and say like, in order for us both to reach, Health, healthy finances, healthy security, healthy emotions, we’ve got to cooperate and get through.
Making sure the credit’s in good space and that’s best for the kids, you know? And when it’s best for the kids, it’s best for everyone involved. So it’s definitely hard to grab that grownup ribbon sometimes, but you gotta do it.
Gary
And it seems clear that now. when you’re in the midst of the divorce, this is one of the things that you have to be planning on during the divorce process itself.
Not wait till the divorce is over and figure out, okay, now we’re at the end. We’ve got the judgment divorce. What do I do next? This has gotta be part of that actual divorce planning.
Margreit McGinnis
I would highly recommend that it be part of it. Uh, absolutely highly recommend and, it is to be financially healthy.
Emotional health, right? If we are feeling insecure, insecure about our cash flow, about our ability to own a home, to provide for our children, that just interferes with just about everything to do with the other areas of life. So it is super important and I, I firmly believe it needs to be part of the original agreement, um, and bringing everybody to onto the same page.
Gary Port
And considering that she lived that, I think I’m gonna end with that.
Margreit McGinnis
Yes.
Gary Port
So thank you very much, Marguerite and Gary Port, from Port and Sava, we try to help you get on with the rest of your life, and this is part of the process. And Marguerite from
Margreit McGinnis
Marguerite McGinnis from Equity First Consultants always here to help you. Equity first consultants.com is our website, so you can reach out to, uh, to myself, um, and um, and with any questions that you have.
Gary
Okay, great. Thanks so much, Marguerite.
Margreit McGinnis
Thanks, Gary.
