How Does Divorce Affect My Credit?

divorce and credit

Divorce is more common than ever: Between 42 – 50 percent of Americans get divorced. The end of a marriage causes many people to experience financial challenges and suffer damage to their credit standing.

Fortunately, divorce itself is not factored into your credit score. Regardless, there are still many financial actions you and your ex-spouse should take during and after your divorce to protect your credit score and ensure overall financial stability.

Minimize financial insecurity

Separating your finances from your ex-spouse will likely result in some kind of financial setback, however major or minor. For instance, you will adjust to living on one source of income instead of two. You may need to take on the cost of a mortgage or rent on your own. You could even become responsible for making payments for a debt that was jointly incurred during your marriage.

It is important to protect your financial well-being right away. For example:

  • Cut back on non-essentials: You may not be able to afford extra luxuries, such as eating out, taking gym classes, or traveling, as often as you were accustomed to before a divorce. This adjustment does not necessarily mean cutting out everything fun in your life. Rather, budget for a few pleasures and treat yourself only when you can afford it. Do not run up high credit card debt because approaching your credit limit can eventually harm your credit score. When the dust settles, and your finances are more stable, you can reintroduce non-essential purchases.
  • Contribute to an emergency fund: Whenever you have disposable income, set it aside. In the event you must rely on child support or alimony payments, any delays or failures to pay by your ex-spouse can leave you vulnerable. Not being able to cover your monthly bills and debts can seriously affect your credit score. Therefore, having a separate fund to draw from “just in case” is wise.

Be accountable for your own finances

Jointly held loans, bank accounts, and credit card debt acquired during your marriage can quickly become sticking points—not to mention precursors to credit problems. Let’s say you are relying on your ex-spouse to pay the car loan, but he or she fails to pay. The delinquent payment history then gets added to your credit report, lowering your credit score.

At the outset of your divorce, consider taking these steps to disconnect financially from your ex-spouse:

  • Close joint bank accounts: Ask all banking institutions to close accounts you hold with your ex-spouse. That way deposits, automatic payments, and fees will not continue to get applied and create more headaches.
  • Pay off the balance on joint credit cards: It is important to pay off any balance on a joint credit card before you close it. Ideally, you will decide ahead of time who will pay off the card or how you will split the balance. One option is to split the balance of the joint card and transfer each half to new, separate cards in each of your names.
  • Get your debt back in your name: Remove your ex-spouse’s name as an authorized user from the credit cards you initially opened. Doing so will help prevent your ex-spouse from carelessly running up a balance that you are then stuck paying down.
  • Make your payments: No matter what, make all your payments as expected. If you are the one paying child support, it is critical to keep up with your payments to avoid a collection or court judgment. Both activities show up on your credit report and can significantly lower your credit score.

A divorce lawyer can help you and your ex-spouse divide debt appropriately. While you’re at it, make sure to review your credit report. A credit repair company can help you find past errors or outdated information that needs to be corrected or removed so you can move forward with a clean slate.



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