Tips to Manage Your Credit During a Divorce

Money Matters

Tips to Manage Your Credit During a Divorce

BY CHRIS TOBIAS

Although a divorce does not affect your credit directly, it can indirectly result in financial problems that can hurt your credit. Take for instance a situation where you lose one of two household incomes; the loss of that income can cause financial strain which results in missed payments on your loans, credit cards and various other bills. So, when you change your marital status, your credit is not affected, but it is the changes to your personal finances which are typically associated with divorce that can have a negative effect on your credit. It is important to note that divorce does not automatically separate the credit you established with your previous spouse. What that means is that even though your debts are apportioned as part of your divorce decree, you will both still be held liable for the debt by creditors. Also, your account details, even the negative information like high credit utilization and late payments, can be reported to the credit bureaus and end up in your credit report as long as you are connected with the account. In the event that your ex-spouse promises to continue making payments on a joint account but defaults somehow, those missed payments will reflect on your credit report as well because you are equally responsible for that debt.

How to Manage Debt in a Divorce

While the divorce itself is not significant to your credit status, it matters how the joint debt and credit accounts are managed. If you want to be able to maintain your financial and emotional balance, it is necessary to take the steps to manage your credit early. The following are three ways that you can manage and protect your credit in a divorce.

Make a plan - You should create a plan before you even separate; do not wait until last minute to plan for life after divorce. If possible, before filing for divorce, you should both weigh up your joint loans, credit accounts and other bills. Then, you can make the decision regarding who will be in charge of paying each one. In the event that you have savings accounts that are entwined, it is necessary to find out the best way to divide assets. Asset division can be done by determining the amount that each person added to the account.

Split or close your accounts In other words, where possible, pay off and close all joint accounts. If it is not possible for you to do that, you can discuss converting the joint account to a personal account with your card issuer or lender. Your ex-spouse will then be removed as an authorized user or account holder. Also make sure that your name is removed from every open account your ex-spouse plans to continue using.

Be responsible - It is important to remember that while waiting for your accounts to be completely separated, there is potential for you or your exspouse to cause damage to each other's credit or to run up joint debt. This is something you want to avoid at all costs. If you want your divorce process to go smoothly, and you want to maintain good credit during and after the divorce process, it is imperative that you act responsibly early on. Make it a point to make your minimum payments on time, and avoid racking up any debt that you don't plan to pay off yourself.

While a divorce can be very difficult to go through for couples, there are certain steps that you can take to make the process less stressful. If you do not take the issue of finances seriously and if you do not manage your credit well before, during and after the divorce, you may find yourself with bad credit and struggling to cope financially after the divorce. So, start taking the necessary steps to manage and protect your credit before you even file for divorce.p

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