After divorce, you may be concerned about your credit score. Your credit score is a three digit number that goes from 300 to 850 with the vast majority of people falling somewhere between 550 (at the low end) and 750-800 (at the high end). How good or bad your score is has a huge impact on your financial life- a bad score means high interest rates or denials of loan or credit applications while a high score means you are a preferred borrower and are likely to get the best deals. So, what impact does divorce have on your credit score and what do you need to do to protect your credit after divorce?
Your Credit After Divorce
It is important to understand that just because you are married doesn't mean your credit score and your spouses are the same. You each have individual credit files, and one of you can have a debt or credit account listed on your credit score that is not listed on the others. If you do have joint debt that you took out in both of your names- such as a joint credit account or shared mortgage- then the debt and its payment record and history will be listed on both of your credit reports.
This does not change after divorce. In fact, many people find themselves with damaged credit because they believe that getting divorced severs debts. For example, assume that you and your spouse had a credit card when you were married. It was in both of your names, but only your spouse ever used it and he charged up a few thousand dollars in record equipment. As part of your divorce agreement, you include that your spouse is solely responsible for paying off the credit card bill. Now assume he doesn't pay. What happens? Creditors will begin trying to collect from you, calling you and dinging your credit for late payments. Worse, they won't go away when you let them know about the divorce agreement.
How can this happen? Simple- if your name was on the debt, then you are half responsible for it, even if your marriage ends. The only thing to do is pay it off when you get divorced or have your spouse refinance that debt into his or her own name. You should also make sure that anything else that you have both names on is transferred to only one name. For example, pay attention to:
- Mortgage payments
- Utility bills in both your names
- Irregular expenses, such as insurance premiums, that may be set to automatically debit from joint bank or credit accounts.
The other important thing to know is that if you didn't have credit just in your name- if you used your spouses cards, for example- you need to get your own credit so you can start building a credit score.
Getting Help
It is very important to take steps during the divorce settlement to protect your credit after divorce. Ask your divorce attorney what you can do to make sure that all debts are taken care of so that you do not end up with damaged credit or stuck with your spouse's unpaid bills.
