A divorce can have an effect on credit scores, due to the debts that can accrue from a previous marriage. According to The Huffington Post, there are many issues related to debt that can result from divorce. Some of these issues may seem familiar, but other may seem atypical, so the HuffPost's tips are sure to be helpful to you if you have recently gotten divorced, or are close to someone who is going through a divorce.
Agreements made in marriage can still persist after divorce
One way a divorce can affect your credit is through debt that was taken out during the marriage. If you and your spouse both signed the paperwork on a car payment and took out a loan to pay for it, you will still have to pay for it even if you have since gotten divorced. So, if a couple is undergoing a divorce it makes sense to resolve as many outstanding debts as possible. While divorce is painful, having debts that a person is still paying even after the divorce has been finalized will make the process more arduous. To avoid this, the source suggested paying off debts before a divorce. Like many issues related to debt, credit and divorce, education is key. If a person goes into divorce proceedings with a clear knowledge of what the proceedings related to finances and debt will consist of, it's much more likely that the process will be relatively smooth.
Dealing with an ex who won't pay
Subsequently, the source listed tips on how to contend with an ex who doesn't pay his or her share of a martial debt. This can have debilitating effects, but there is one notable way to prevent it from happening, noted the source. This consists of invoking an indemnity clause, which will let a partner bring his or her ex back to court to deal with issues related to debt. Speaking to a lawyer about this clause will be helpful for a person going through a divorce, especially if they're worried about a former partner refusing to pay their share of the marital debt. Should debt fail to be paid off, the effects on an individuals's credit will be disastrous, so avoiding this scenario is essential with regards to credit.
Transparency and responsibility is a key component of expediting debt process
According to the Your Mortgage, making sure that regular payments on shared debt are made is an essential part of retaining a viable credit score. Refusing or missing payments can have adverse effects on a credit score and can even lead to a default on a credit report, which will be calamitous for your financial situation, such as making it more difficult to get your hands on a loan in the future. The source also recommended taking a long-term view regarding finances during a divorce. Thus, it would impractical to make rash financial decisions during divorce proceedings that could imperil your credit in the future. The source suggested letting a financial planner take a judicious look at a settlement agreement, to ensure that you're well aware of the financial repercussions of the settlement.
Another factor to keep in mind regarding finances and divorce is the fact that delinquency regarding taxes can hurt a credit score, according to Chicago Tribune. The source noted that any form of delinquency can hurt a credit score. This is due to the effects on the mortgage market that have resulted from economic issues.
Following these tips should help credit scores stay solid, even after a divorce.