How To Protect Your Credit During A Divorce
Every divorce is different. Detangling your credit obligations from your ex-spouse is complicated, regardless of your gender.
Ultimately, its up to you to try to safeguard your credit from damage during a divorce. These three tips might help.
Looking for ways to protect your credit during a divorce? Here are 5 more tips which might help.
Protecting Your Credit After A Divorce
Remember that payment history and level of debt are the two biggest factors affecting your credit score. Maintaining a positive payment history and minimizing your debt during and after the divorce are key to keeping your credit score intact. Heres what you can do to maintain your credit score during and after the divorce.
Adjust your lifestyle to your reduced income. When you’ve been used to living on two incomes, downsizing your life to fit one income can be tough. It often requires some major life changes. That may mean selling your house and buying a less expensive one. It may mean moving to an apartment. If you can no longer afford your auto loan payments, you might refinance the loan or sell the vehicle and buy a less expensive one. You may have to reduce the grocery bill, eat out less, and cut out cable television.
Have a solid spending plan to help you adjust. Create a budget to figure out what you can and cannot afford. Prioritize your most important expenses and keep up the payments that have a direct impact on your credit score, e.g. loans and credit cards.
Try to cover your primary expenses out of your income, not including alimony or child support. Some vindictive ex-spouses may skip payments, try to have the amount reduced, or even quit their job to spite you. It might be difficult to live as though youre not depending on those court-ordered payments, but if the payments ever stop, youre already prepared.
Change Credit Card Accounts
When spouses have a credit card together, the card is usually in one spouse’s name, and the other spouse is an . Working together to pay off these accounts may be the best approach for protecting your credit score. If you are able to do so, there will be no disruption to your and your credit score will remain intact.
However, if working together to pay off these accounts is not possible, it is imperative to have your name removed as soon as possible from all the accounts for which your ex is responsible. This prevents any damage to your credit history should your ex make late payments or if an account in their name becomes delinquent. Likewise, you should remove your former spouse as an authorized user from any account over which you retain control. That way they cannot run up a large balance on your account.
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Final Decree Of Divorce
A final decree of divorce may legally grant the ability to close joint accounts and deal with all joint financial matters including who is responsible for which accounts.
However, it does not change any financial obligations you and your ex-spouse have with your creditors. Creditors arent bound by the final decree of divorce, so they still expect payment until the debt is paid in full.
If payment is not received by the person in charge of the account, then the negative entries will be reported on the credit reports of all persons whose name was on the account when it was created.
Even missed or late payments that occur years after the divorce has been finalized can have a harmful effect on your credit score.
Unfortunately, spiteful behavior during a divorce can have a huge impact on your credit score. Many times, soon-to-be ex-spouses decide to run up bills in hopes to ruin the others finances. However, they usually dont realize that doing so will affect them just as much.
Nevertheless, there are ways you can protect your own finances and credit during the divorce process, whether you have a spiteful ex-spouse or not. Even well-meaning people can unknowingly do damage, so its best to take matters into your own hands.
How Divorce Can Hurt Credit Scores
Lets start with the good news. Divorce doesnt automatically trash your credit scores.
In fact, you dont have to worry about divorce itself hurting your credit at all. Your marital status isnt reflected on your credit reports and it has zero direct influence over your scores.
Still, its no secret that divorce and credit problems commonly go hand in hand. Here are two reasons why your credit scores might drop during a divorce:
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About Credit Scores And Reports
When reality sets in, both may want to reconsider counseling
About Divorce Mediation
Divorce mediation is about choosing your future instead of remaining chained to the past.
With BJ Mann as your mediator, you and your spouse or partner work through the issues that need to be resolved. This allows you to end your marriage or relationship as amicably and cost-effectively as possible.
BJs book, A Better, Not Bitter Divorce helps you understand your options and guides you to the divorce decisions that are right for your situation.
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Alimony and Child Support CalculatorCalculate temporary or post-divorce spousal alimony as well as child support. This calculator is courtesy of Joy S. Rosenthal, Esq.
What Is A Divorce Decree
When you are going through a divorce with shared credit accounts, you should eventually come across a divorce decree. This bit of documentation can state who is ultimately responsible for any accounts opened during the marriage. If the person named in the divorce decree cannot or does not fully pay any debts on the shared accounts, the action will hit both spouses in the end, divorced or not. This means that if your ex-spouse is putting off their responsibilities according to a joint credit account, you might need to be concerned.
At Hollingsworth Roberts Means, LLC, our experienced Indianapolis divorce attorneys can assist you if you are worried about damage to your credit score or credit report during a divorce. We can ensure that appropriate steps are taken to shut down or otherwise manage any joint credit accounts before things get out of hand. Call 317.DIVORCE today to request a consultation with our compassionate and talented team.
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Get Professional Legal Help With Your Credit And Divorce Questions
Your credit score is a vital part of your financial health. If you’re contemplating a divorce, you’ll want to understand who will carry the bulk of the debt after the marriage and how this could impact your credit history. You don’t need to try and answer these questions on your own, however. A local divorce lawyer will be able to set your mind at ease.
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Take On New Debt With Caution
While we always hope that divorce proceedings are quick and inexpensive, the truth of the matter is that they oftentimes are not.
Even with the best of intentions, parties on both sides can become emotional and frustrated when having to decide how to split up kids, a house, cars, and everything else youve built together over the years.
These legal battles can result in excessive lawyer fees, sometimes costing tens of thousands of dollars. If that ends up being the case, you might need to take out a personal loan to keep up with your legal financial responsibilities.
Hopefully, youve been careful with your credit and can qualify for a loan with competitive interest rates and terms.
If your credit score is lower than youd like, look for alternative lenders who specialize in loans for people with poor credit. No matter what type of financing you choose, just make sure your monthly payments fit into your new budget.
Depending on the results of your divorce proceedings, you might also be in the market for a new home and maybe even a new car, if your joint assets have been sold off. Dont let this become an opportunity for retail therapy.
While you want to be comfortable in your home and your vehicle, particularly as you start such a bold new chapter of your life, you also dont want to saddle yourself with burdensome monthly payments. Find the right balance in what makes you happy and what keeps your wallet full.
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Things That Won’t Hurt Your Credit Scores
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- Some actions may affect your finances, but won’t change your credit scores
- Getting married or divorced doesn’t directly affect your credit scores
- Seeking help from a credit counselor will not impact credit scores
You may already know that certain behaviors such as paying your bills on time, every time can reflect positively on your credit scores. But its also important to know that not every action will directly impact your credit scores at all, either positively or negatively.
The following items may influence your finances, but they generally wont have any effect on credit scores:
1. Paying with a debit card
Using a debit card, rather than a credit card, to pay for items typically wont impact your credit history or credit scores. When you pay with a credit card, youre essentially borrowing the funds to pay back later. With a debit card, youre using money you already have in an account. No borrowing is involved.
The same is true for prepaid debit cards, which you can buy with a dollar amount already loaded onto the card. Prepaid debit card activity generally does not appear on credit reports from the three nationwide credit bureaus.
2. A drop in salary
Also, a drop in income can hurt your credit scores if it results in late or missed payments on your credit accounts. Payment history is typically used to calculate credit scores.
3. Getting married
4. Getting divorced
5. Having a credit application denied
6. Having high account interest rates
What Can I Do About A Bad Credit Score
Think you have a bad score? Dont stress theres great news: credit history arent fixed! Your score will change when the details in your credit report modifications. That indicates you can take control of your financial health now by making changes that will favorably impact your credit score with time. Heres a couple of things anyone can easily do to begin:
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How Does Divorce Affect Credit Scores And What Can You Do About It
Marriage is more than a bonding of two hearts. Its also a union of finances and financial responsibility.
However, money is a common source of marital stress and a leading cause of divorce. In a recent survey, 79 percent of divorcees said money played a role in their divorce.
When a marriage fails or ends, your heart bears the emotional toll, but thats not all. Your credit score could also take a hit.
While we cant do much about your heart, we can do something about your finances and credit score.
In this article, we answer the question how does divorce affect credit and tell you how to protect your credit.
Keep reading!
How Do Credit Scores Work Anyway Does Divorce Affect Credit Score
A credit score is a substantial element of your financial life. It plays a essential role in a lenders choice to state yes or no to your loan or charge card application. For example, individuals with credit history below 640 are normally considered to be subprime debtors.
Lending institutions frequently charge interest on subprime home mortgages at a rate higher than a standard home mortgage in order to compensate themselves for handling a high risk customer. Depending upon how low your credit score is, they might also require a much shorter payment term or a co-signer.
On the other hand, a credit score of 700 or more is usually thought about great and could cause you getting a lower rate of interest. On loans like home loans, a slightly slower rate of interest can wind up saving you 10s of thousands of dollars over the repayment term!
Ratings greater than 800 are thought about exceptional. Its worth keeping in mind that while every creditor specifies its own varieties for credit report, the following FICO score range is typically utilized:
- Excellent: 800 to 850
- Fair: 580 to 669
- Poor: 300 to 579
In short, your credit score is a mathematical analysis of your creditworthiness and directly affects how much or how little you may pay for your credit. Your credit score can likewise determine the size of a down payment required on items like phones, utilities, or apartment leasings.
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The Reality Of Not Enough Money
After the big split, I found myself maintaining the same household on greatly reduced resources. On top of that, I had taken on a higher portion of the debts to insure that they were paid. Unfortunately, what was manageable while I was married soon became the ultimate juggling act as I tried to pay bills before their due date.
Next thing I knew, the state had placed a lien on my house and vehicle due to unpaid taxes on my ex’s business. While I was still reeling from that shock, I was notified by a collection agency about my ex’s delinquent credit card debt . Thanks to community property laws, I discovered that I was equally responsible for that debt. Before I knew it, my good credit had gone down the drain.
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 spouses name so that it isnt 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.
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Why Does Divorce Affect Credit Rating
When you and your partner apply for credit together, the lender will look at your credit files and scores. This is because, with any joint credit, each of you is legally responsible for the debt and payments. So, if one of you cannot keep up with your share of the debt, the other is legally obliged to make the payments.
The shared debt will show up on your credit report .
Once listed, it may mean that in the future, your ex-partners credit report will also be taken into consideration on any future applications you make, even if it is in your sole name. And the association will remain if you have those joint debts. Getting divorced or separating will make no difference.
This is the core reason why divorce affects a persons credit rating. Your first assumption may not be that your former partners credit will impact your access to credit, in which case you may get a nasty surprise at some point in the futureunless you take appropriate action now.
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