If you are in the process of going through a divorce, there are so many things to consider logistically, including dividing possessions, moving out, and figuring out the way forward, in the midst of an incredibly emotional time. If you take these steps, you can minimize the impact that divorce has on a credit score. Amidst this challenging time of getting a divorce, we have compiled just a short list of factors to consider in how divorce could impact your credit score. As a side note, while spouses are required to disclose financial accounts during a divorce proceeding, you may want to run a credit report on your ex-spouse just to ensure that he or she is being truthful.
1. Adjusting to New Credit Card Limits
Going from two incomes to one income is already challenging enough, but you may also have a new credit card limit due to a change in income. Credit card companies often check if there have been any salary changes for their clients and are allowed to make adjustments to credit limits if there have been. This may mean that you are suddenly faced with spending more than the advised 30% of your credit limit, which can in turn negatively impact your credit score. As you adjust to a new life and new spending habits, the impact of the new credit card limit will lessen, and you will soon see an improvement in your credit score, but it may take a little time.
2. Making Sure Payments Are Made
In the midst of the chaos of a divorce, it is important that spouses figure out who is paying what bills. A missed or late payment can stay on your record for seven years, so it is essential that no payments are missed even during this hectic time. Even if your ex-spouse is unwilling to make a payment on some account, make the minimum payment and then ask the judge for reimbursement. This way, you can avoid impacting your credit score even if your ex-spouse is not being cooperative.
3. Dealing With Joint Accounts and Joint Debts
It is important that you deal with joint accounts during the divorce proceedings. You should either remove one individual from the accounts in question–whether they are joint owners, co-signers, or authorized users–or close the accounts. If you fail to do so, any missed payments from a joint account will impact the credit scores of both parties. While you may have been very hurt, it is helpful for your financial health if you remain as civil as possible when figuring out financial details. If you and your spouse have debts, you should try to refinance your loans and transfer credit card balances to another line of credit. If you and your spouse have been able to stay civil during these process, it should be fairly easy to do this, but you may need to resort to attorneys if you and your spouse cannot come to an agreement.
In conclusion, a divorce does not impact your credit score directly. Instead, the way that you handle the divorce will indicate what kind of impact the divorce will have on your credit score. If you adjust to a new credit limit, make sure payments are made, and deal with joint accounts and joint debts in a civil fashion, you likely will see a minimal impact to your credit score after a divorce.