Ok, so good news first: divorce does not directly affect your credit, let alone harm it. For all the personal information your credit reports contain, they don’t list your marital status.
Address? Yep. Social Security number? You got it. Remember that missed mortgage payment from six years ago? Your friendly, neighborhood lenders probably won’t let you forget it.
But marital status? Eh.
Divorce is not enjoyable. It’s an emotional process, often lengthy, painful, expensive, and (occasionally) very, very messy. Of course, once you’ve put divorce in the past—all the court dates and the legal fees and the snarky remarks—it’s likely to stay there.
Now for the bad news: credit has the wonderful ability to find wherever you buried your past, dig it up, and toss it headlong back into your life with three seemingly-innocent packets of paper.
Payment history is the single largest factor of your credit score, so any of your missed or late payments in the last seven years are fair game. And if your ex is responsible for any account with your name on it—let’s say, a car payment or a credit card—you better hope they’re paying their bills on-time.
You and your ex don’t really want to spend more time together now that you don’t have to anymore, let alone keep paying bills together. You both really want to put that part of your life behind you and make it stay there; but how?
1. Beware Joint Accounts
The first thing you need to do—even before you start the divorce proceedings, if possible—is to order all three of your credit reports and check for any joint or authorized accounts between you and your spouse. Credit cards, mortgages, credit and equity lines, any and all insurance—the courts might require you to split the responsibility of those payments, but a divorce decree DOES NOT require lenders to literally split your accounts unless you contact them, and even then they might decline your request.
If you have any joint or authorized accounts, dismantle them as soon as you can. You have your own payment history to worry about, don’t spend the next seven to ten years worrying about your ex’s as well.
Find out what kind of debt you currently share with your ex, how to split it up such that neither of you is overwhelmed and unable to make future payments (which could definitely damage your score), and BUDGET.
You probably have legal and moving fees to worry about already, so an extra auto payment or health insurance bill might seem like the coming of the apocalypse. You’re going to want to draw those purse strings so tight they meld together, but it’s better to keep a level head, communicate, and sacrifice any subscription or self-care expenses in favor of being able to cover potential sources of debt, such as student loans and utilities.
Divvy up the existing debt between yourselves until you can fully untangle your finances and start building your lives (and credit) independently. In the meantime, it’s better to make sure all the bills are paid, and if that means waiting a few more months until one or both of you are on steadier ground then so be it.
As a precaution, get familiar with the property laws in your state to avoid tripping over any extra debt incurred during your marriage. Different states apply different rules to debt liability, and being aware of extra debt, though painful, is better than not knowing and ruining your score through a series of missed payments.
Tensions and emotions run high in every divorce, and it can sometimes feel hard to keep it all in check. You weren’t expecting your marriage to end this way, but it’s happening, it’s happened, and now you’re reading this article. The sun’s still rising way too early for your liking, the bus is still late for your morning commute, and your ex is probably sitting somewhere, mouse in hand, asking the same questions you’re still asking yourself right now.
How did I get here? And how do I move forward?
Keep a level head. Don’t instigate or antagonize; don’t give them a reason to whip out your jointly-owned credit card and go on a rage-fueled shopping spree. Communicate with each other, stay on top of your payments, don’t saddle each other with un-payable amounts of debt, and cancel any joint or authorized accounts when you’re both financially and physically able to.
Like marriage, divorce is an evolving process—the best you can do is take it step-by-step, day-by-day. And don’t forget, you’re not alone! We here at Prime Credit Advisors are happy to help, whether that be by showing you how to protect your credit, or how to build it back up as you move forward.