How Divorce Lowers Credit Score

Wondering if your divorce will show up on your credit report? Short answer – no, your marital status is not included in your credit information. But that doesn’t mean that your credit activity while you were together won’t affect your credit after you separate. Let’s see how divorce lowers credit scores and what you can do to prevent that from happening.

Divorce is a significant shift in anybody’s life. You’re not just changing your routine in a big way and juggling questions from friends and relatives. You and your partner both carry the heavy task of separating your finances from each other. That is because remaining joint accounts can impact your future chances of qualifying for credit – if only because your ex inadvertently lowers your credit score. So, check your credit reports in preparation and follow up if the financial separation went well.

Two Key Ways Divorce Lowers Credit Score

If old information stays in your reports or your former joint accounts are not separated correctly, incorrect information may appear in your credit report. Moreover, new information may show up in error if old information isn’t erased.

Creditors and Debt Collectors Don’t Honor Divorce Decrees

A divorce decree is a ruling that the court issues during a divorce. The decree holds information about the division of your marital assets, as well as debts. It also states which spouse is in charge of paying each creditor.

For instance, if you have a joint car loan, the divorce decree states who will keep the car and who has to pay the loan. That’s all nice, but unfortunately – creditors don’t honor divorce decrees. So, although a judge may have ordered your former spouse to keep up with the debt payments, your credit can take a plunge if your ex doesn’t handle the debt.

Joint Accounts Show Up on Your Credit Reports

Opening a joint account with your partner means that the account is then added to both of your credit reports with the three major credit bureaus – Experian, Equifax, and TransUnion.

And your joint accounts don’t disappear when you divorce, especially from your credit reports. Lenders care about one thing only – getting paid back. So they will expect just the same that both of you pay back the borrowed amount of money, along with interest. Moreover, no matter who is responsible for it, the account will still appear on your credit reports.

You can see how this can get messy. If your ex-spouse is in charge of making payments and makes one late, both your credits can take a hit. The late payment will show up on your credit reports and lower your credit score. And if you share a joint account with a scorned lover, they may decide to rack up charges on your shared account, obligating you to pay for the debt as well.

Racking up charges can have multiple harmful impacts on your credit. A high credit utilization rate can also impact both of your credit scores, no matter if you make payments on time or not.

Protect Your Credit Score During Divorce

It won’t be easy, but it’s possible. Follow these tips that will keep your credit score from falling:

● Close the joint credit accounts.
● If your ex-spouse is anywhere listed as an authorized user of your credit cards and has authorized access to your accounts – make sure you remove them.
● Are you dealing with a scorned lover? Afraid they will open fake accounts in your name? Then think about freezing your credit reports.
● Try to have an amicable split – if you have a car loan, then it’s only fair that the spouse keeping the car will refinance the loan in their name only.
● Another amicable split option is to sell the joint assets (cars, mortgages, etc.) and use the money to pay off the remaining joint debts.

During the whole divorce process, be diligent and double-check all your financial information available on your credit report. Is your ex-partner’s card still listed there, although you no longer have authorization for it? Don’t let this slip by and act to get it erased. Perhaps the bureaus updated some information in error – check for mistakes, such as your ex-partner’s new address showing up as your address.

Move Forward – With Both Your Life and Credit Report

Divorces are overwhelming, and a professional credit analyst can help you carry the burden of such a situation. At White, Jacobs and Associates, we provide the help of experienced analysts who will sit down with you for free counseling and review in detail your financial situation. You may be ending one partnership, but with the help of another one, that will always have your back.