Last Updated on May 31, 2022 by Benson Varghese
As you consider divorce or are going through divorce, you may start thinking about your credit score – and you should. Divorce can certainly have indirect but profound effects on your credit score. Learn more about divorce and your credit score here.
Divorce and Your Credit Score
While getting divorced does not damage a spouse’s credit directly, it can result in financial issues that do affect credit. For example, when a couple divorces one spouse may remain in the marital home, attempting to pay the bills on one income instead of two. Mortgage payments, utility costs, car payments, and other expenses are considered joint expenses, regardless of whose name is on the bill or title.
Missed payments will negatively impact both spouses, and anyone else who is on the account. Even in the event, a judge orders one spouse to make payments for joint debt, if the responsible spouse fails to do so, the creditor reports the issue for late or non-payment to credit reporting agencies. It is easy to see how joint debts can become substantial problems in terms of someone’s credit score upon divorcing. Many financial advisors even recommend putting a freeze on credit files.
Check Your Credit Score
When going through a divorce or already divorced, it is recommended that you check your credit reports as often as possible without damaging your credit score. For instance, Experian allows people to check their credit score at no cost, at any time they want. Monitoring credit reports keeps you informed of any changes or unpleasant surprises. Everyone may obtain a free credit report once per year from the three credit reporting companies which include Experian, Equifax, and TransUnion. The Federal Trade Commission reports that women in particular may have more of an impact regarding their credit score after divorce.
Protecting Your Credit Score During a Divorce
While it may not be possible to maintain a perfect credit score when going through a divorce, there are some things that can be done to protect credit which include:
Try to avoid a contentious or vindictive split.
It is in both spouse’s best interest to maintain an amicable relationship and to work together to close or pay the balance on any joint accounts.
Check with lenders to ensure you are the only authorized user listed on the account.
When a spouse’s name is listed on an account that you believed was in your name only, have it removed.
Convert to an individual account.
When it is not possible to close or pay off an account, see if it is possible to convert it to an individual account. A lender can enlighten you about available options.
Continue to make payments.
While it is not always possible, spouses should make every effort to make payments in a timely manner on any joint accounts that have both names listed. This helps lighten the financial burden that often follows divorce. Consider scheduling a consultation with us if you’re in north Texas if you want to ensure your financial rights remain protected after divorce.
Rebuilding Your Credit Score After Divorce
It is not possible to rebuild your credit score overnight after getting divorced, however, it is possible to protect your credit and rebuild. The two primary factors that impact credit score are the level of debt and payment history. This means it is important to reduce debt while maintaining a good payment history.
Some of the things you can do to protect your credit and begin to rebuild include:
Create or modify your budget.
It is imperative to determine what can and cannot be afforded. Credit cards and loans have a direct impact, so it is important to make payments on time and make the most important expenses (mortgage or car payments, etc.) a top priority.
Adjust to living on one income.
When married, spouses live on a joint income. Those who become single often find it difficult to live on one income, so adjusting is essential. Whether it means dining out less often, buying fewer groceries, remove subscriptions, or refinancing an auto loan, consider eliminating whatever is necessary to adjust to a lifestyle that can be maintained by a single income.
Review your credit report and cut financial ties with your spouse.
Credit reports and billing statements can be used to develop a list of joint accounts. To ensure these accounts are closed, request closure with creditors both by phone and in writing. It is also important to request the creditors do not re-open these accounts.
Put debts in your name only.
When one spouse is responsible for a debt it is a good idea to put the debt in that spouse’s name so that it isn’t a joint debt. Transfer balances on credit cards to another credit card, refinance loans, and do whatever it takes to make it so that you can pay the debts in a timely fashion. In some cases, an attorney may be necessary to work out any details that spouses cannot agree on.
Remove authorized use by your ex-spouse on credit cards.
While many ex-spouses trust each other, it is never a good idea to keep an ex-spouse listed on credit cards as an authorized user. Should an ex-spouse decide to go on a grand shopping spree, the creditors will not hold them accountable.
Make sure to monitor all accounts and payments.
In many divorce situations, one spouse is liable for paying accounts in the ex-spouse’s name (for example, a mortgage when the ex-spouse remains in the home). Be sure to keep on top of due dates, and check to see if payment has been made or is pending the closer the due date comes. It may be necessary to make a minimum payment on an account when your ex-spouse does not make it in order to protect your credit. In this situation, the judge can request repayment to you by your ex-spouse.
Schedule a Consultation with Varghese Summersett Family Law Group
Many people are concerned about their credit score after divorce. Good credit is essential for many reasons, however, the joint accounts and debts acquired during a marriage can make it difficult to maintain after divorce. Varghese Summersett Family Law Group provides those who are divorcing with answers to their questions as well as legal guidance and representation. Consider calling our experienced legal team today at (817) 900-3220.