The residual effects of your divorce can have a substantial impact on your credit score. When a couple gets divorced, their liabilities are allocated. This means that one person might take over one credit card, while the other spouse takes over another one. In addition to allocating your different accounts, the expenses accumulated from your legal expenses can also have a significant effect on your credit rating. In this blog, we explain the different ways that divorce can impact your credit score.
Joint Credit Accounts
It is important to remember that your payment history and level of debt are the two biggest factors that will affect your credit score. Maintaining a good on-time payment history and minimizing your debt both during and after the divorce are essential aspects of keeping your credit score in good standing.
You will need to sever your financial ties to your spouse once you realize you will be getting divorced. You should review your credit report and recent billing statements to make a list of all the accounts that are jointly held between you and your spouse. Make sure you close your joint accounts in writing and by phone, also ask the creditor not to re-open your joint accounts. You will also need to remove your spouse from the list of authorized users on your accounts to ensure that they don’t run-up a negative balance.
You and your spouse will need to sort out the debts that each individual is responsible for. Don’t trust your spouse to continue to make payments on accounts that are in your name. In fact, if these bills don’t get paid and they’re in your name, your credit will end up suffering. Remember, whoever’s name is on the account will have to deal the subsequent credit issues.
To get the debt organized into each spouse’s name, you might need to refinance loans and transfer credit card balances to another credit account. If you and your spouse can’t reach an agreement on organizing each other’s debt, you should consult with an attorney to help mediate your dispute.
While you are negotiating an agreement with your spouse, keep up with at least the minimum payments on the accounts that will affect your credit score. If your spouse is responsible for making payments on accounts in your name, make sure to keep track of the due dates and check for payment as the due date approaches. You can also ask the judge for repayment from your spouse if you are making payments your spouse is responsible for.
Do you have more questions about how divorce can affect your credit score? Contact our Monmouth County attorneys to set up a free consultation today.