You might hear people complain about the effect divorce had on their credit score. As you consider divorce, you might be concerned about it. Will your score drop?
Not necessarily. Divorce proceedings don’t directly impact your credit score. However, divorce causes many financial changes, and those can make a big difference in your score.
According to the credit agency Experian, the impact often comes from the joint accounts you share with a spouse.
“Accounts are reported for each individual associated with that account, so if you are listed as a joint owner, cosigner, or authorized user, you must deal with that account prior to the divorce. That means closing the account completely or ensuring that one name is totally removed from the account,” Experian wrote in a blog post.
A divorce decree does not automatically close any accounts. It may specify which partner is responsible for those accounts, and if it’s you, make sure to take care of those as soon as you can. More importantly, work with your ex to make sure he/she manages any accounts assigned to him/her. The reason: late payments will appear on both your credit reports and therefore negatively impact both credit scores. Even if the late or missed payment occurs years after a divorce, if you are still listed as part of the account, you will be affected.
If your ex is angry, they may try to use these actions to hurt you. You may have heard horror stories of a husband or wife racking up debts to ruin the other’s credit. By the way, this isn’t a good idea; it will also ruin your own credit at the same time.
Lack of Money
After you and your spouse split, your income is likely far less, making it a lot harder to maintain the exact life you had before. Many people find themselves struggling to pay all the bills. Of course, missed payments are an easy way to lower your credit score. That’s one reason many experts advise women, especially, not to keep the house. As you begin the divorce process, it’s important to draw up a budget for yourself based on your income as a single individual. And it’s something to keep in mind as you and your ex divide the assets and debts.
If you’re concerned about your financial future after divorce, join us at a Second Saturday workshop to get your questions answered.