How To Protect Your Credit During a Divorce
Protecting Your FICO
When going through a divorce, it is very easy for your credit to get off track. In fact, if you don't plan properly, your credit can be adversely affected years after the divorce is finalized. Therefore, it is important for you to take the proper steps in order to keep your credit protected while going through a divorce.
Why Should I Worry About My Credit?
Your credit record is important for a number of reasons. First of all, your credit rating is consulted when you apply for a loan. If you have a poor credit rating, it may be difficult or even impossible for you to get a loan.
Or, if you do qualify for loan, the interest rate may be very high and you will pay a great deal in finance charges. In many states, your credit rating can also affect your insurance rates or can possibly make it difficult for you to get a job.
How Your Credit is Affected by Divorce
When you got married, you and your spouse likely combined your finances in many ways. You may have taken out a mortgage loan together, you may have car loans together, and you may have joint credit card accounts. As soon as you took out a loan or a credit card in both of your names, your credit ratings become intertwined.
Therefore, if your spouse handles this credit or loan poorly, it will be reflected on your credit report. If you did not combine any loans or credit cards, you may not have as much to worry about. But, keep in mind that even utility bills in both of your names can hurt your credit rating if it goes unpaid.
Divorce and Credit Books
Resources for Protecting Your Credit During Divorce
- How Do I Protect my Credit When I Get Divorced?
Good advice on handling the big three financial issues during divorce - the house, the car, and the credit cards.
- Clean Up Your Credit After Divorce
A helpful guide to cleaning up your credit report after going through divorce to establish your own good credit again.
Protecting Your Credit
The best way to keep your credit protected is to pay off all of your bills before the divorce is finalized. If you sell your home and if you had equity in the home, for example, you can pay off your mortgage loan and you may have enough money to pay off all of your other bills as well. If not, you need to proceed with caution.
When you get divorced, your paperwork will state who is responsible for paying what bills. Unfortunately, this court decree is irrelevant to your lenders if your name is on the loan. Therefore, you are still held responsible for the payment of the loan.
Consider this scenario: you and your spouse purchase a vehicle during the course of your marriage. When you get divorced, the court decides to allow your spouse to keep the vehicle but he is responsible for paying the rest of the loan on his own.
If your name is on the loan and your spouse misses a payment, this will be reported on your credit rating as well. The fact that your spouse has possession of the vehicle and has been ordered to pay the loan does not matter.
In order to avoid this situation, you should push for your spouse to be ordered to obtain a new loan in his name only. If this is done with all of the bills that you are each responsible for, you will no longer have to worry about the damaging effects your ex can have on your credit rating long after the divorce is finalized.