There is so much to think about when going through a divorce. And for many people, their credit score is not one of them. Instead, they are hiring attorneys, worrying about their kids, trying to find new living arrangements, and learning as much as possible about a complicated legal process. More often than not, they find themselves stuck in an endless loop of back-and-forth bickering with their spouse — which, as everyone knows, only makes things worse. But perhaps you should think more about this very important number.
A person’s credit score is a numerical expression of their creditworthiness for things like car loans, credit cards, mortgage loans, lines of credit, etc. It is also one of the most neglected elements of the divorce process. Granted, your marital status does not impact your credit score, but many people do not realize how much a credit score can suffer under the financial weight of a contested divorce.
Potential clients may devise creative ways to pay for legal services as the divorce gets underway.
Existing bills and debt can also pile up as parties neglect to make their payments on time.
And not to mention, managing joint accounts with your spouse — during and after a divorce — is next to impossible for some couples.
The purpose of this blog post is not to give you a breakdown of how your credit score works, why it is important, and what is considered a good and bad score. You can find that information by clicking here. What we do want to discuss are a few ways your credit score can be impacted by divorce and tips to help protect your score right now — especially if you are starting your divorce journey.
5 Ways Your Credit Score Is Impacted By Divorce
1. Not paying or defaulting on joint debt
It is easy to forget about paying your car note or credit card when going through a divorce, and it is bad enough when the debt is yours and yours alone. However, sharing debt with your spouse can be worse. Often, one spouse is unaware that the mortgage bill or credit card payments are late. Even if a judge rules that you are not responsible for specific debt in the settlement agreement, the creditor sees you as liable since the credit was obtained in both of your names.
2. Becoming over-extended
Between attorney fees and court costs alone, divorcing spouses must often find creative ways to keep everything moving. This can include maxing out credit cards or taking out personal loans or lines of credit. You may be able to pay the bills on time, but carrying high credit card debt can hurt your score and keep you from getting approved in the future.
3. Your spouse closes joint credit card accounts
While it may seem like your credit score will improve when joint credit accounts are closed, it can actually work against you by limiting your total amount of available credit. This is especially true if you or your spouse close too many accounts at once or over a short period.
4. You are removed as an authorized user
Divorcing spouses are quick to remove the other as an authorized user on their credit card. And that makes complete sense. But if the spouse who was removed does not have much existing debt left on their credit report, their score can suffer from not having that extra credit history.
5. Vengeful ex-spouses
Though rare, some contested divorces get out of hand and result in one spouse opening credit in the other spouse’s name to hurt them financially.
How You Can Protect Your Credit Score During a Divorce
A bad credit score can impact you weeks, months, and years after the divorce is final. Consider these tips to protect your credit score.
- Divide joint accounts amicably. For example, the spouse who keeps the house can refinance that debt in their name only. Both spouses can work together to settle debts without being delinquent.
- Prioritize paying bills on time. This can sometimes be easier said than done, but it helps maintain a solid credit score.
- Be responsible with your existing debt. If you can wait to get divorced, do it. If you cannot wait, create a plan for how you wish to pay for legal services and avoid taking out additional credit lines if it might lead to additional financial hardships.
- Create new checking and savings accounts to safeguard your individual finances.
- Be aware of your financial situation. The more aware you are of your individual and joint credit situation, the easier it will be to stay on top of payments and monitor your credit score.
- Monitor your credit reports periodically to spot significant changes in your history and overall score.
Call Nelson Law Group today!!
If divorce is the answer, you need a trusted advisor to guide you through each stage of your divorce, help you deal with the stress that naturally comes with that, and create an environment where you have control of divorce and your financial situation. We work diligently to achieve a result that ensures you receive what you are entitled to as you move forward onto the next stage of your life.
Give our knowledgeable staff here at Nelson Law Group, PC, a call if you have any further questions regarding this or any other issue. Our staff is always available. Give us a call today! For more information about Brett A Nelson, click here.