Many individuals know the strain divorce places on relationships, but did you know that it could hurt your credit score as well? While not directly connected, divorce influences the way your finances are handled, which in turn affects your credit. Credit scores are vital for future expenses and major purchases such as cars and homes. They alert potential financers and bankers of your reliability to pay back loans and debt. To protect yourself, you should understand what divorce does to your credit.
A divorce decree establishes how debt and financial accounts will be divided during a dissolution of marriage. The courts will usually assign each party responsibility over a form of debt. For example, one party may have to pay the mortgage while the other handles the car loans. While your ex may be liable for an account, if your name is on it, it will still affect your credit score. Joint accounts impact both spouses. Carefully review your divorce decree before signing off on it. It will later affect how your credit builds. To ensure your divorce decree accounts for your needs, have an attorney look over your case.
Many factors can hurt your credit score, as it relates to divorce. Joint accounts, in particular, affect how your score fluctuates because you cannot control your ex’s financial activity.
Common reasons for a lower credit score after divorce:
Preemptive action can help you protect your credit score before it is harmed. By learning more about how finances work and paying off debts as soon as possible, you can protect yourself from future economic difficulties.
1. Close Joint Accounts
If possible, close any accounts you share with your ex. If it can be done prior to signing the divorce decree, you may prevent your ex from incurring further debt you may have to be responsible for later. You will have to make sure the accounts have no balance. If they do, that may be something to work out before the divorce.
2. Freezing Accounts
If your joint accounts do have a balance, you can ask creditors to freeze the account to stop any future charges. This will prevent a vindictive spouse from increasing debt to spite you.
3. Make Payments on Time
This might seem obvious, but it’s worth stating. You may need to cut down on the cost of living or seek extra employment to supplement bills. Whatever you have to do, make payments on time. This will directly impact your credit score.
4. Establish Your Own Credit
In some cases, an individual uses their spouse’s credit. However, after the divorce, it is important to get your own. You can start building credit by applying for credit cards and using them wisely. You may want to apply before or during the divorce, as it might be easier to obtain.
If you plan to buy a house or want to lease a car, it is important to have solid credit. You divorce can be draining enough, do not let it cause more damage to your credit. If you need help navigating the complexities of a divorce decree or feel like your ex might use unfair tactics to get the upper hand, contact our Colorado divorce attorneys. We will review your case and help protect your rights!