Divorce does not directly affect your credit rating. There’s no factor for divorce or marital status when calculating credit, but divorce does cause a lot of upheaval, specifically to your finances.
As if the stress of ending a marriage wasn’t bad enough, the impact of the financial strain that tends to result can hurt your credit score. Going from two incomes to one can make it hard to pay all your bills on time, and if you fall behind, that will hurt your credit.
The first thing you need to do when separating from your spouse is to come up with a new budget that takes into account your reduced income. If you’re expecting any child support or alimony as part of the divorce settlement, do not include it in your budget. Many spouses avoid making these payments as a form of revenge against their ex-spouse, regardless of what the court order says, while others are simply unable to make the payments due to their own financial circumstances. Either way, you’re better off not depending on that income.
Joint accounts that have both your name and your ex-spouse’s name can also be problematic, as can shared debt. Judges generally assign one spouse to be responsible for handling the account/debt, but your credit score doesn’t know that, nor does it care. As long as your name is on that account, your credit score will be affected by it. In some cases, when divorces get nasty, people will intentionally avoid paying off debt in order to hurt their ex-spouse’s credit rating. Of course, doing so also hurts their own credit rating, but people rarely act rationally when they’re hurt and angry.
For this reason, you will want to keep track of all accounts that bear your name, even if you’re not the primary account holder. It’s a good idea to at least make the minimum payments, then ask the court to order your ex-spouse to reimburse you for those payments.
Remember that joint accounts aren’t the only accounts that can affect your credit score. Any accounts on which you are listed as a cosigner or authorized user can also be used to hurt your credit score. Make sure all your accounts are in order when going through a divorce, and leave no stone unturned when making sure your name is only associated with the accounts for which you are directly responsible.
For this reason, when dividing up assets and responsibilities in the course of a divorce, it’s best to get one name completely removed from any joint accounts you held with your spouse during the marriage. Whether that means getting your name removed from accounts for which they are now responsible or vice versa.
Alternatively, you can simply close those accounts (both over the phone and in writing, and make sure you have a copy) and ask them not to reopen the account. The best way to regain total control of your finances after a divorce is to make sure your name is only associated with the accounts for which you are responsible, and that the accounts for which you are responsible bear only your name.
The attorneys at Sherer Law Offices have been providing legal representation for divorce cases, as well as all types of family law for more than 20 years. Our experienced divorce attorneys will take the time to really listen to your unique situation so that they can plan strategies that can best protect your best interests.