Divorce is a challenging process, both emotionally and financially. While the emotional aspects of divorce are often given primary attention, the financial implications, particularly concerning credit, deserve equal scrutiny. After all, credit plays a pivotal role in your financial life, influencing your ability to get loans, mortgages or even specific jobs.
A common misconception is that divorce directly affects your credit score. In reality, your marital status is not a factor that credit bureaus consider when calculating your score. However, the financial decisions made during and after divorce can indirectly affect your credit standing.
How divorce can indirectly affect your credit
The top way divorce can impact your credit involves joint debts. If you and your ex-spouse co-signed for a loan or credit card during the marriage, you are responsible for these debts, regardless of what your divorce decree states because your creditors aren’t a party in a civil divorce case. If your ex fails to make payments on a joint account, it could negatively impact your credit. Additionally, the cost of divorce can be high, leading to financial strain that might result in missed payments or increased debt. These factors can contribute to a lower credit score.
Protecting your credit during and after divorce
Working to ensure that your credit remains unaffected during a divorce involves proactive steps. Firstly, change accounts to individual status, instead of closing them, whenever possible. If that’s not feasible, communicate with your ex-spouse to ensure regular payments on joint debts. Selling assets to pay off debts may be beneficial because you won’t have to worry about whether payments are being made or not.
Obtain a copy of your credit report and review it for any errors or unexpected changes. It’s also wise to create a post-divorce budget to effectively manage your income and expenses, preventing potential financial strain from missed payments.
Divorce is undoubtedly a challenging experience, but understanding its potential impact on your credit can help you take necessary precautions. With careful planning and financial vigilance, you can navigate this challenging time while maintaining your financial health.