Divorce and Your Credit

You two may have “called it splitsville” years ago, but the credit reporting world isn’t as quick to call it quits.

You may think that those credit blunders are history, but unless you separated your debts the right way, your ex-spouse (or, rather, your ex’s finances) may still be dragging your name through the mud.

If both of your names are on an account, each of you is fair game. State laws vary, but in most places you are responsible only for debts that were incurred during marriage. (There are exceptions, such as debt for family medical necessities or education for a child during divorce.) So, thankfully, you won’t get stuck shouldering his private school student debt or her premarital bank loan.

If you are still bound to an ex by a banking relationship, contact the creditor to close your joint accounts (a divorce decree divvying up the bills doesn’t count), and reopen or open another account elsewhere in your name only. Don’t forget retail charge cards, gas cards, and that $38.53 in your joint “Christmas account” at the bank.

If your entire credit history is tied to your ex, you may find it difficult to qualify for credit on your own merit. Stay strong and be patient. Start with your bank and see whether it has a credit card for which you qualify. If that option doesn’t work, get a secured credit card. It works like a prepaid Visa or Mastercard where you pay a security deposit, which serves as collateral for your purchases.

Ideally, you would close all your joint accounts. If you owe a balance, however, credit card companies typically won’t let you close the account, so you may have to settle for freezing it to prevent future charges. Remember that a freeze also keeps you from using the card, so make sure you have plastic in your own name first.

Once the account has been frozen, the balance can be paid off or, better yet, transferred to the responsible spouse’s individual account.

A side note: Closing old accounts and opening new ones can have a negative effect on your credit score,

Contact the creditor. Call to ask the creditor to make a note in your file that you’ve split with your spouse and explain how you want the account to be handled. If you’re able to close the account, request that the creditor report to the credit bureaus that the account was closed at your request.

Make it clear that you will not be responsible for any further charges as of the day you call. Take notes of your conversations, including times, dates and contact names, and write down any instructions the creditor gives you for what to do next.

But here’s an important tip for secured loans: Don’t allow your name to be taken off the title if your name is still on the loan. You don’t want to be responsible for the debt if you no longer own the asset.