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How to Protect Your Credit Score Before and After a Divorce

How to Protect Your Credit Score Before and After a Divorce

Divorce has a way of destabilizing life in unexpected ways. For example, your credit score may be at risk of taking a hit during a divorce, unless you’re careful and take several steps to protect it. This is because the typical married couple’s finances are so intertwined, that disentangling the various debts and accounts can take significant time and effort. As long as you are vigilant (and keep a spirit of cooperation with your ex-spouse), then there’s no reason why your credit score should go down after your divorce.

Get Copies of Your Credit Reports

Your first step should be to obtain copies of all three credit reports from the credit reporting bureaus. This will allow you to identify all your accounts that are jointly held between you and your spouse.

As part of the divorce process, you may be issued a “divorce decree” by the court. This is a way of splitting up assets and debts between the two parties, but it’s up to you to do the legwork. You’ll need to contact creditors, close accounts, set up new accounts, and all other necessary steps yourself.

Do Your Best to Close Your Joint Accounts BEFORE you Divorce

Ideally, once your divorce is finalized you won’t have any active joint accounts. This isn’t always possible, depending on many factors including whether or not you’re carrying any balances. But as long as you continue to hold joint accounts with your ex-spouse, then your credit score will be affected by his or her missed payments, bankruptcy, etc.

The best way to close a credit card account, obviously, is to pay the balance off first. If you don’t have the funds to do this, you and your ex-spouse can set up individual accounts in your own name and then transfer the previously agreed-upon amounts to each.

Remove Your Spouse’s “Authorized User” Settings

Have your ex-spouse removed on any accounts where he or she is an “authorized user,” and have your spouse remove you as an authorized user from all accounts. This makes sure your spouse can’t continue to access your credit, but it also makes sure your credit score isn’t affected by any of your spouse’s accounts.

Refinance “Installment Debt”Credit Repair

Installment debt, like a home mortgage, is more difficult to divide in a divorce. The best option is to refinance the loan, if possible. That way you can have yourself or your spouse removed from the loan.

If you are unable to refinance an installment loan, then make an agreement, and put it in writing, that divides the responsibilities for maintaining payments.

Make a New Start Within Minimal “New Debt”

Perhaps the riskiest part of divorce (as it pertains to your credit score) is the financial burden it can place on you in the form of lawyer fees, moving expenses, etc.

Do your best to track your spending and come up with a temporary budget while you make your transition.

Going Forward

Once you’ve done all you can to have joint accounts closed, authorized users removed, and debt and assets divided, you could probably benefit from a credit tracking service. Errors have a way of popping up after a divorce (you are dealing with multiple creditors and credit reporting companies, after all), and you want to be able to fix any mistakes as soon as possible.

 
photo credit: Jorge Franganillo via photopin cc
photo credit: Dave Dugdale via photopin cc

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