There’s a tendency that you may suffer credit damage after a divorce, not because of the divorce itself, but because of an indirect impact that steams from the action, so does divorce affect your credit score?
Does Divorce Affect Your Credit Score?
You may encounter financial troubles that could hurt your credit indirectly after a divorce. This is because, you may lose one or two household incomes that could cause you financial strain, which can lead to missed payments on your credit cards, loans as well as other bills. As we all know, missing payments can affect your credit score negatively.
Divorce could also cause problems for your credit score if payments are not made on accounts you hold jointly with your ex, or soon to be ex. Some divorce proceedings may declare one spouse responsible for the joint debt, which means if that spouse fails to pay, the creditor adds the late payment to both your credit reports.
How To Protect Your Credit After Divorce
- Work to get the debts you’re responsible for in your own name. You can start by refinancing loans and transferring credit card balances to another credit card. Ensure you make at least the minimum payments on the accounts that affect your credit.
- Do away with your spouse’s authorized user status from any credit cards. This is because you would not appreciate your ex-spouse running up a balance that creditors won’t hold them liable for. (it is advised you check with your attorney first, before closing accounts to know if your spouse is financially dependent on you).
- Try as much as you can to make payments on accounts that have your name on them. These include mortgages and car loans even if your spouse is still making use of the things you are paying for. As long as you have the financial capacity, it is best you pay for these things to salvage your credit score, because your ex may not really be concerned with making payments on accounts that do not really affect him/her.
- Disconnect from joint debt as soon as you sense divorce. This will make the financial transition much easier. Go through your credit report, and use current billing statements to make a list of all accounts that are jointly held. Make sure you close the account in writing and by phone for extra security and ask the creditor not to re-open them.
- It is best also to try as much as you can to cover your primary expenses out of your income. This does not include alimony or child support.
- Outline a solid spending plan that can help you adjust, by creating a budget or modifying your existing one to ascertain what you can or cannot afford. Keep up payments that have a direct impact on your credit score and prioritize your most important expenses.
- Live a less flamboyant lifestyle and cut off some of the luxuries you were enjoying when you were living on two incomes.
- Keep track of the due dates and check for payment as the due date approaches if your spouse is to pay accounts in your name. You can make the payment to avoid late a payment added to your account and have the judge prompt your ex-spouse for repayment. Monitor your credit also to avoid a late payment.