5 Ways To Protect Your Credit Score During And After A Divorce
Do you know to protect your credit score during a divorce?
Life must go on –– even after a divorce. That’s why you should still protect your credit score so you will get to live life moving forward. If unfortunately, you find yourself in this predicament, your financials still shouldn’t be neglected. Your financial history talks about your credit history and reflects how you handled yourself in a divorce.
Protecting your credit score without facing any marital issues is already challenging enough, what more having to go through one. However, it doesn’t mean it can’t be done. When you are going through a divorce, you should still think of ways how to protect your credit score.
Along with the change in your marital status is also the change in your financial status, your credit score will not get impacted just yet. But it should be closely monitored during and after divorce.
In this post, you will read about some methods on how to protect your credit score during and after divorce so you will not be worried about it in the future.
Did you co-sign a credit card?
The thing is…
If you had co-signed a credit card with your spouse, you have to pay his/her debts as well after the divorce. This means if your ex-spouse has debts, you still have a responsibility to pay them. Your credit score will get impacted by your former spouse’s payment history.
After the divorce process, it is better to check the co-signed credit card and ask your partner to remove you from the credit card.
Will divorce reduce your credit score?
Yes, divorce will certainly reduce your credit score if you don’t close joint accounts with your ex-spouse. Financial changes are inevitable after the divorce, and so is the credit score impact.
Here are a few reasons how and when the divorce will lead you to a poor credit score:
- Your income might fluctuate after the divorce proceedings. When you are going through a divorce, you should calculate the income and set up the budget with another financial source.
- If your credit card has your former spouse as an authorized user, the debts of his/her will reduce your credit score. It is always the best choice to check and remove your ex-partner as an authorized user.
- The credit utilization rate plays a vital role in changing your credit score. If the credit utilization rate increases after the divorce, the credit score will fall.
- Joint credit card accounts will reduce your credit score after the divorce process.
Credit utilization rate after divorce
If you are wondering what a credit utilization rate is, read below to get a clear idea.
The credit utilization rate divides the total credit you have by the total revolving credit. Even if you have a positive payment history, the credit utilization rate will go up if you have a joint account with your partner.
For instance, if your revolving credit is around $35,000 and your partner removes them from the card, the changes will increasingly affect your credit utilization rate, and your credit score drops.
5 Ways to protect your credit score
Divorce will not directly show an impact on your credit report, but due to some financial changes as a result of the divorce, you will see a drop in your credit score.
When you handle your credit properly, you could improve your credit score.
1. Close your joint credit account
Joint accounts appear on you and your spouse’s name. It is best to close your joint accounts so that your debts are separate.
You should contact your card issuer for closing your joint account and making a single one for yourself. You may either pay the debts and close your account or change it to an individual account.
When you are not aware of any joint accounts, then look at your credit reports for that. You will get a free credit report by contacting any of the three major credit bureaus (Experian, Equifax, and TransUnion) or by the annual credit report.
Until your accounts are separated, you and your spouse are responsible for running the joint debt or risk damaging your credit. If you are responsible for your credit now, then your credit recovery will go smoothly because you don’t need to worry about your credit.
2. Inform your creditors about your divorce
Make sure that you inform your creditors about your divorce so that when they approach the credit bureaus, they will mention it on your credit report.
In case of any joint debts, the creditors will know that and it will be easier for them to maintain separate records.
Since filing for divorce is an emotionally driven process, you and your spouse may not be focusing on the financial part at first, but it’s still important for your creditors to know.
Informing your creditors about your situation will save you a lot –– in terms of how your credit score goes. As much as you want to be private, keeping them updated with your marital status, especially when it affects your marital status is key.
- Make use of your credit cards wisely
Credit cards carry 30% of your FICO credit score. When your credit card debt is low, your score will rise. A divorce will not show any impact on paying off your joint debt. If you own a credit card in your spouse’s name, then it is better to remove the authorized user name from that card.
You need to maintain your credit card bills and pay them on time while you are undergoing the divorce process. If you are not able to make the full payment, it’s best to at least make the minimum monthly payment.
During the divorce process, make a note on your credit cards and their debt. Keep an eye on your credit card so that its debt will not increase.
4. Check your credit reports frequently
It’s best to check your credit reports frequently. If you want to protect your credit during divorce, then look at your credit report before, several times during, and after the divorce.
You might not know the amount of debt owed in case of any joint accounts, but you will know the financial details from your credit reports.
If you find your spouse’s name added to your report, then request the credit bureau to remove the last name from your credit report.
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5. Put a credit freeze on your account
If you have any outstanding balance, your creditor will not allow you to close that account. In which case, you must freeze the account.
Freezing an account will help it by preventing further charges, but you are responsible for the existing balance.
When you freeze your account, your spouse will not be able to access your credit account and your spouse cannot open a new account in your name, too.
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Regardless of what phase of your life you’re in, we adults must also not forget about our financial status. You must maintain a credit score that you can benefit from in the future, even when you’re in a middle of a divorce.
In case of any errors on your reports, contact a legitimate credit repair service.
Of course, maintaining good credit habits like on-time payments, having low or no debt, and viewing your credit reports frequently, will help improve your score, which is important to keep in mind during and after a divorce.
Frequently Asked Questions
Are debts shared in divorce?
In a joint credit card account, yes, the debts are shared between the spouses. Even if one of them did not use the card, the debts are shared between them still.
Can you remove a co-signer from a mortgage without refinancing?
No, there is no option for removing a co-signer from a mortgage without refinancing. The lender must agree to remove your name from the co-signed loan.
Can you open a credit card during the divorce process?
Yes, you can open a credit card during the divorce. But make sure not to close the joint account immediately after the divorce, since it increases the credit utilization rate.