A divorce can affect your credit in many ways. Whether you are divorced, planning to get divorced, or want to protect yourself “just in case,” there a few things to consider.
For some, if all the bills have been in one spouse’s name and not the other, you may find you don’t have a credit history. This can hurt one’s ability to get loans after a divorce. This is one reason why it is important to keep some credit accounts in each spouse’s name. It can protect your finances against a variety of ills… divorce, spousal death, disability, etc.
Some women will also change their name when they become married. It is important that your credit history follow to the new name. You must alert all credit agencies and all your credit accounts to the name change. In reverse, when there is a divorce, often women return to their own name. The same process must follow again.
With joint accounts and a divorce, there come many issues. Credit that is in both party’s names is the responsibility of both parties. Even if a judge determines one spouse must pay off a credit account, in a joint account, the credit company will still hold BOTH parties liable for the balance – no matter what the court documents say. Therefore, the best method in a divorce is to close out ALL joint accounts.
One of the largest accounts a married couple often holds to together is their mortgage. Still, this account follows the same rules… no matter what the courts say both parties are responsible for the loan. Thus, often the easiest route is to sell the home and remove the debt. If one wants to keep the home, then he or she must refinance with a new loan – one that is only in his or her name.
The break up of a marriage is messy; don’t continue the heartache by avoiding these common issues. Divide and eliminate all mutual credit and accounts immediately before or after the divorce.
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