It’s no secret a divorce can be one of the most emotionally draining events anyone can go through. After separating from one another, both spouses have to deal with loss, failure, and regret, not to mention their finances. From legal fees and alimony, to child support and division of assets, a divorce can make a huge impact on otherwise healthy finances.
But contrary to popular belief, a divorce won’t have a direct effect on your credit score. However, it can affect your credit indirectly. Here’s how.
- Your Ex-Spouse Stops Payments on Joint Credit Accounts
It’s common for spouses to share joint credit accounts just as they would credit cards or mortgages, which is why it’s important to agree on what happens to your line of credit after a divorce, as it could still be under both your names. Lenders don’t care if you’re divorced or not—they care about payments and whose name the credit account is under. If you’re on civil terms with your ex, it shouldn’t be hard to work out mutually beneficial payment terms. But if you’re dealing with someone who might intentionally avoid payments to hurt your credit, talk to your lender and bring a lawyer to make some changes.
Here’s what financial advisers suggest you can do in this scenario:
- Freeze the credit account until a resolution has been made
- Remove your ex-spouse from the account
- Close the account and open a new one under your name
Any of these changes should be discussed carefully with your attorney. Often time, in cases that are already pending in Court, you may not be able to make these changes without violating Court Orders. For that reason, it is important to have a consultation with an attorney prior to making any of the changes above.
- Your Divorce Racked Up Too Much Debt in Expenses
A long, drawn-out divorce can be expensive, causing you to miss payments on bills and loans, which in turn will hurt your credit score. It gets worse if a complicated custody case is involved, which can quickly add up to $20,000 to your initial divorce expenses. And because most people won’t have that kind of cash on hand, they’ll usually taken on more loans or miss bills payments, hurting their credit.
To avoid this problem, you can do the following:
- Use marital assets such as a car of house to pay off existing debt payments (again, this option would have to be discussed with your attorney)
- Draft a budget taking into account your expenses following a divorce, increasing income and reducing monthly expenses
- Be ready to make a lifestyle change—you probably won’t be able to maintain your pre-divorce standard of living
- Your Spouse Refuses to Sell Marital Assets
Arguments over finances are often part of what triggers a divorce, and this issue may persist after the dissolution of the marriage. For instance, your ex may refuse to sell off marital assets, such as the house. This means one or both of you will still be liable for the mortgage, putting your credit at risk.
Talk to your divorce lawyer and your spouse about what to do with marital assets. Avoid sharing mortgage payments, as this can be a recipe for disaster, no matter how trustworthy you think your ex is. Instead, refinances the mortgage and put it under your name, or your partner’s. Better yet, sell the house if possible.
Learn more about securing your financial health during and after a divorce with Lyttle Law Firm. Visit our website or call our offices at 512-215-5225 to schedule a consult.