Preparing for Divorce? How to Safeguard Your Credit Score

Posted on

You may be wondering what divorce has to do with your credit score. The relationship is certainly not a direct one, as separating from your partner is not a decision that is factored into your credit history.

However, the financial changes that accompany a divorce may affect your ability to keep up with regular credit card payments, mortgage payments, car loans and other aspects that do affect your credit score. Some divorcees find themselves unable to keep up with the financial status that they had before a divorce. This often results in missed/skipped payments that may ultimately lower their credit score.

If you're undergoing a divorce, you should consider what your financial situation will be after separation (and how it may affect your credit score). In fact, there are several steps you can take to safeguard your credit score from being affected.

1. Ensure that all joint accounts are closed or modified as necessary

Many couples open joint accounts during the course of their marriage. These could be joint credit card accounts, bank accounts, mortgages, etc. If both partners are co-signers or authorised users on the account, then missing or delayed payments will affect both your credit scores.

During a divorce, the challenge arises when one or both partners are unwilling/unable to keep up with regular payments. To avoid this problem, make sure you either close the account or remove your partner as a joint owner/authorised user. You may also need to contact the lender of the account to adjust the lending contract.

If you have a joint debt with your former spouse (such as a loan that you jointly took), consult a family law attorney to determine how you can develop a plan for repayment with your partner.

2. Adjust living expenses to meet your new income levels

In most divorce cases, both partners end up with a lower income than they had before. The higher income earner may need to pay child support and alimony payments, while the lower income earner may not have the support that they received during the marriage.

If you still have loans and other debt that you need to pay, make sure you adjust your new lifestyle to meet your reduced income levels. Prepare a new budget to determine how much you need and cut down on expenses as necessary.

3. Remove your ex-spouse as an authorised user from your credit cards and bank accounts

There are cases where an unscrupulous ex-spouse goes on a spending spree with your credit cards/bank accounts. This often occurs if they have access to such accounts. To protect yourself, make sure you remove your former spouse from all credit cards and bank accounts that you solely own.