DIVORCE AND YOUR CREDIT

Divorce and Your Credit Score

A reality plaguing married couples today is the increasing divorce rate.  Unfortunately, the results that follow a divorce may be worse than the dissolution of the marriage itself.  Many side effects of divorce include loss of money, credit issues, depression and personal bankruptcy.

 

Couples who divorce are more likely to experience financial complications in the months and years following the divorce.  Perhaps this is because more couples are experiencing money problems even before the marriage dissolved, which potentially caused the divorce.  Maybe it is just too difficult for them to adjust from two incomes to one and still maintain the same amount of monthly debt.  In any event, there is no denying that divorce and money problems often coincide.

Individuals who are recently divorced or who are considering it should take several factors into consideration regarding divorce and their credit score.  Even if the other person is primarily to blame, simply obtaining a divorce will not protect someone from mounting financial problems.

As soon as it is known that a divorce is going to occur, or if it has already happened, you should waste no time in informing anyone with an interest in your financial affairs that your name should be removed from any and all joint accounts.  This includes both banks and credit card companies.  Regardless who is responsible for spending the money, both partners share equal responsibility in paying the bills on jointly held accounts. 

 

This means if your ex or soon to be ex decides to go out and max out all of the credit cards, even if you are unaware, you will remain responsible for the bills; even after the divorce, if your name is still on the account(s).  If you and your ex cannot or will not pay the bills, you will both receive bad marks on your credit ratings.

After you have had your name removed from all joint accounts, you need to open all new accounts with only your name listed.  This serves a two-fold purpose.   First, after you close out all joint accounts, you may have little to no accounts remaining that you are able to access.  You will need to open new accounts to conduct simple daily business.  Secondly, it is critical that you begin to create your own credit history, separate from that of your ex. 

 

This is particularly important if you were not the primary wage earner within your marriage.  Experts recommend opening a regular banking account, a savings account and obtaining a credit card in your own name.  Secured credit cards are always an option for individuals who are not able to qualify for unsecured cards.  A secured card works no differently than an unsecured card and will help you to rebuild a credit score.

It is commonly recommended that you run a credit check on yourself to avoid any unpleasant surprises.  This is important if you were not the person to handle the finances within the marriage.  You may have no idea where your credit score or the credit score of your spouse stands.

 

Even after you have taken steps to have your name removed from joint accounts, previous actions of your spouse may still affect you well into the future.  While there is nothing you can do now about bad financial decisions your spouse during your marriage, you can at least be prepared for what will happen in the future.

You should not make any major purchases right away.  Individuals who are recently divorced may suffer from depression and often try to make themselves feel better by making rather large purchases. Not only will this deplete your financial reserves, it can also have a negative impact on your credit score.  Instead, wait until the initial shock of the divorce has worn off.  You can always make any purchase you want at a later date.

Finally, begin to set financial goals for yourself.  Decide how much money you would like, and are financially able to contribute to your savings account.  Think about any major purchases that may be necessary in the future and how much money you will need to save in order to buy them.  Construct a budget for yourself so that you know exactly the minimum amount of money needed in order for you to meet your monthly obligations.

If you have experienced a divorce and are trying to dig yourself out of the debt incurred during the marriage, then you may want to contact a debt reduction company.  To avoid prolonging your situation, a qualified debt resolution company can help reduce your debts to a manageable level so you don't have to consider bankruptcy and further ruin your credit score. 

 

For a free consultation from Professional Debt Advisors, call us toll-free at 866-559-DEBT (3328) or simply fill out the form on the right.  A Financial Advisor will be in touch within one business day.