By LaToya Irby. Credit/Debt Management Expert
Welcome to About.com's Credit/Debt Management site, led by your guide, LaToya Irby. LaToya has been the credit and debt management guide since 2007. Read more
Many people suffer credit damage after a divorce, but it’s not because of the divorce itself. After all, your marital status isn’t included on your credit report nor is it factored into your credit score. So the physical act of separating or divorcing won’t impact your credit score.
If credit cards or loans are among those missed payments, your credit score would be affected.
Or, if payments aren’t made on accounts you hold jointly with your ex or soon-to-be ex, your credit will be affected, too. In some divorce proceedings, the judge declares one spouse responsible for the joint debt. That spouse fails to make payment and the creditor adds the late payment to both your credit reports. It doesn’t matter to the creditor that the judge said the other spouse is responsible for payments.
In some cases, one spouse purposely hurts the other person’s credit, out of spite or revenge. Again, this isn’t the divorce itself that hurts the credit score, but the events that occur because of the divorce.
Here’s what you can do to keep your credit rating intact during and after the divorce.
Adjust your lifestyle to your reduced income. You might have to make some major life changes to live only on your income. That could include selling your house and buying a less expensive one. It may mean moving to an apartment.
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If you can no longer afford your auto loan payments, you might refinance the loan or sell the vehicle and buy a less expensive one. You may have to reduce the grocery bill, eat out less, and cut out cable television.
Create a budget (or modify your existing one) to figure out what you can and cannot afford. Prioritize your expenses and keep up the payments that have a direct impact on your credit score, e.g. loans and credit cards.
Try to cover your primary expenses out of your income, not including alimony or child support. Some vindictive ex-spouses may skip payments,
try to have the amount reduced, or even quit their job just to spite you. It might be difficult to live as though you’re not depending on those court-ordered payments. But if the payments ever stop, you’re already prepared.
Deal with your joint debts . Sever your financial ties to your spouse as soon as you realize divorce is happening. Go through your credit report and use recent billing statements to figure out which accounts are jointly held. Close these accounts, in writing and by phone for extra protection, and ask the creditor not to re-open them.
Remove your spouse’s authorized user status if you want to keep them from running up a balance that creditors won’t hold them responsible for.
Each ex-spouse should work to get the debts they’re responsible for in their own name. If you and your spouse can’t work out these details together, perhaps the attorneys can reach a better agreement. The sooner, the better. In the meantime, try to keep up the minimum payments on the accounts that affect your credit. Otherwise, the court will have to make a final decision about debt responsibility.
It sounds insensitive, but for your credit’s sake, don’t trust your ex-spouse to make payments on accounts that have your name on them. That includes mortgages and car loans, even if your spouse is still living in the house or driving the car. Often, people just aren’t as responsible with things that don’t directly affect them.
Stay on top of payments. If your spouse is responsible for paying accounts in your name, keep track of the due dates and check for payment as the due date approaches. To protect your credit, you may have to make the minimum payment. Ask the judge to have your ex-spouse repay you for the payments you made.
Credit monitoring is often recommended as a way to find out about late payments. However, by the time a credit monitoring service alerts you to a late payment, it’s already been added to your credit report. Since late payments aren’t reported to the credit bureaus until they’re 30 days late, you have time to pay before your credit is affected, but you have to catch it first.