how divorce affects your credit

Will a Divorce Negatively Impact my Credit Score?

Filing for a divorce is one of the most consequential decisions anyone ever has to make. There are many factors to consider, and emotions always run high. Getting a divorce will impact you in numerous ways. Your marital assets will be divided (hopefully in a fair and equitable manner), and if there are children involved, you will need to work out issues such as child support, child custody and visitation. There are also financial implications beyond just the division of assets.

For example, there are now two households to support with the same overall income. This means double the housing payments, leaving less disposable income and a lower standard of living for everyone. There may also be tax implications that couples are not aware of.

Another possible area of concern during a divorce is your credit. Your ability to borrow money for the best interest rates and most favorable terms and conditions could be extremely important, especially during the transition from being married to becoming single again. One question divorcing spouses often ask is “will a divorce negatively impact my credit score?”

There are actually two answers to this question. The short answer is “no”, the act of filing for divorce does not have any direct impact on your credit score, because your marital status has nothing to do with your creditworthiness. So, if all other factors remained the same, dissolving your marriage could leave you with the same credit rating you had before you filed for divorce. That said, things do not remain static when you are going through a divorce, and there are some indirect ways your credit score could be negatively impacted by the process.

Here are two of the most common ways a divorce could negatively impact your credit score:

Inability to Pay your Bills

As mentioned earlier, divorce can have a major financial impact on the household. When spouses are living apart, they now have more bills to pay with the same amount of income. Not to mention that divorcing spouses often need to come up with thousands of dollars to cover their legal fees. The financial cost of the divorce could cause you to get behind on one or more of your credit accounts. And since on time payments are one of the major factors that go into your credit score, even a few late payments could cause your score to drop significantly. There is no easy solution to this issue. You will either need to live on less or earn more. Ideally, you should try to do both.

Spouse Doesn’t Pay Joint Accounts

During the course of the marriage, it is highly likely that you and your spouse opened some credit accounts together. As the marriage comes to an end, these accounts need to be dealt with. There may be some accounts that you are responsible to pay, and there may be some accounts that your spouse is responsible to pay. Just because a court rules that your spouse is responsible for a certain debt, however, this does not mean you are off the hook. If your name is on an account, you made a contract with the lender to make payments per the terms and conditions of the loan. This means that if your spouse does not make timely payments on those joint accounts, or refuses to pay them at all, it will affect both your credit scores.

There are a few ways to deal with this potential situation. First of all, once you become aware that you are getting a divorce, close all joint accounts that have no outstanding balances. This will limit the amount of financial damage that could be done, which is especially important if you have a spouse who is a spendthrift and/or has a tendency to be vindictive. Also, do everything possible to limit the number of joint accounts that your spouse will be responsible for when the divorce is finalized. For example, if your spouse is taking ownership of the marital home, insist that it is refinanced and placed in their name only. If they are not willing to do this, do not relinquish ownership of your portion of the property.

If there are joint accounts that cannot be closed, be sure to monitor them closely and make sure that your ex-spouse is paying them as agreed. To protect yourself even further, insist on and indemnity clause being written into the final divorce decree. An indemnity clause gives you the right to file a civil claim against your ex-spouse in the event that they do not pay the debts they are supposed to, and you decided to pay them to protect your credit.

Speak with a Compassionate San Diego Family Law Attorney

If you are facing a divorce, there are many ways that it will affect your life, and it is important to have skilled counsel by your side to provide legal guidance and moral support. At Garmo & Garmo, we understand how divorce impacts our clients, and we work closely with them to provide the strong personalized representation they need and deserve. For a consultation with one of our attorneys, call us today at 619-441-2500 or send us a message through our web contact form.