Partner
A credit score is a number that banks and other financial institutions use to decide how likely you are to pay back borrowed money. This score can affect many parts of your life, such as your ability to rent a house, get a loan, or even land a job.
Divorce itself does not directly impact your credit score, as marital status is not a factor in credit reporting. However, the financial changes and obligations that come with divorce can affect your score significantly. During a divorce, joint accounts, shared loans, and the overall division of financial responsibilities can lead to missed payments, increased debt levels, and the misuse of credit. If one spouse fails to pay a jointly held debt, such as a mortgage or credit card bill, it negatively affects both spouses’ credit scores. Moreover, the costs associated with setting up a new household can lead to higher credit utilization rates, which can also decrease your score.
Here’s what you need to know about monitoring your finances, planning for the future, and protecting your credit score during a divorce.
How Joint Accounts and Liabilities Can Affect Your Credit Score
Many married couples have joint accounts for things like credit cards, loans, and mortgages. Owning these accounts jointly means you and your spouse are both responsible for paying back the debt, regardless of who incurred it or who uses the account most. If your spouse fails to make payments on these accounts during a divorce, it can hurt your credit score.
For example, if your spouse fails to pay a joint credit card bill, this missed payment will show up on your credit report as well, potentially lowering your credit score. Since payment history is a major factor in credit scoring, even one missed payment can cause a significant drop.
During a divorce, your spouse’s financial behavior can continue to affect your credit score as long as your name remains on the joint accounts. This interconnected financial liability means that any accumulated debts or mismanagement of the accounts by either party reflects poorly on both spouses’ credit histories. This connection can persist until the debts are fully paid off or the accounts are formally separated by the creditors.
Strategies for Protecting Your Credit Score in Divorce
As you separate your joint finances, you need to implement strategies to ensure your credit remains intact. Here are some practical strategies you can use to protect your score:
- Freeze Joint Credit Accounts: As soon as you anticipate a divorce, freeze your joint credit accounts. This prevents both you and your spouse from accruing new charges that could increase your mutual debt and harm your credit score.
- Get a Legal Separation Agreement: Work with a lawyer to get a legal separation agreement that outlines who is responsible for which debts. This document can provide clarity and reduce the risk of missed payments that could affect your credit.
- Set Up Credit Monitoring: Subscribe to a credit monitoring service to keep tabs on your credit score and report. These services alert you to any changes in your credit status, such as new accounts opened in your name or changes in account balances.
- Obtain Temporary Orders: If you are concerned about your spouse’s financial responsibility, request temporary orders from a court. These orders can mandate that your spouse must pay certain debts during the divorce process.
- Divide or Consolidate Debt: Discuss with your attorney the possibility of dividing or consolidating marital debt. This might involve transferring joint debts to individual accounts in each person’s name to simplify the payment process and reduce the chance of missed or late payments.
Contact a Divorce Attorney Now
Worried about your credit score in the midst of a divorce? Take control today by teaming up with Bozanian McGregor LLC. Contact us now to arrange your initial consultation, and let our Paramus divorce attorneys help you maintain your financial stability during and after your divorce.