Divorce does not have a direct impact on your credit. None of the big 3 credit bureaus – Experian, TransUnion, and Equifax – use your marital status as a gauge of your creditworthiness. That means your FICO score will not rise or fall as a direct result of getting divorced.
Having said that, divorce can still influence your credit standing. For example, suppose you and your spouse are both listed on a credit card. Both of you are responsible for paying the balance. If your ex maxes out the card without paying it down, the creditor can still come after you for the money. If you refuse to pay down the balance, the creditor can send your account to a collection agency.
That can show up in your credit history.
Below, we’ll show you how to protect yourself from credit-related troubles after ending your marriage. Take the following steps to ensure your FICO score remains unscathed after the smoke clears.
Close Your Shared Credit Card Accounts
The example above should make clear the importance of closing any credit card accounts that you share with your husband or wife. Even if you’re on good terms with your soon-to-be ex-spouse, the relationship can sour quickly during the settlement negotiations. Anger and resentment may prompt your ex to charge items for which he or she has no intention of paying.
Call your card issuers and let them know you’re getting a divorce. They won’t remove your name or the name of your spouse from your joint accounts. But they’ll close the accounts to prevent further charges. At the same time, open new accounts in your name only.
Close Your Joint Bank Accounts
It’s also a good idea to close bank accounts that you share with your spouse. That includes checking accounts, savings accounts, and money market accounts. Although your ex cannot charge items to such accounts like he or she might to a credit card, the funds can be easily withdrawn.
Keep in mind, you’ll need money to pay bills, buy food and gas, and pay your divorce attorney. If your spouse drains your joint accounts, you’ll be left without financial resources to do so.
Don’t assume your spouse will treat you fairly. Be proactive, and close the accounts as soon as you know your marriage is doomed. Open new checking and savings accounts in your name.
There may be legal issues involving how much you can withdraw from a joint account, and the timing of the withdrawals. Your attorney can help to ensure that you don’t run afoul of any legal restrictions.
Refinance Your Home Under A Single Name
If you and your spouse own a house together, both of you are probably listed on the mortgage loan (assuming the house is not yet paid off). This too can present a serious problem with regards to your credit.
Ideally, you and your ex will agree to sell the house, pay off the loan, and split whatever proceeds are left over. But what if you’re unable to sell your home for a reasonable price? You’re then forced to trust that your ex will continue to make timely payments (or pay his or her half). If he or she fails to do so, your credit score could be put in jeopardy.
In most cases, you won’t be able to simply remove your name or your spouse’s name from the mortgage. The lender offered the loan and interest rate based on your and your spouse’s combined creditworthiness. From the lender’s point of view, both of you are responsible for paying the balance.
The best alternative is to refinance the loan in your name or your spouse’s name.
Getting your life back on track after a divorce is already difficult. Doing so with poor credit makes the experience even harder. Unfortunately, many divorcing couples fail to take steps to protect their credit from ruin. In the end, one or both parties are often forced to declare bankruptcy when they fall behind on their bills.
The good news is that you can protect yourself. Follow the steps described above to prevent your ex-spouse’s actions from having an adverse effect on your credit score.