When you think about low credit scores, you might tend to think that they are caused by the recession and the many bankruptcies the economy has made necessary. But, many who have experienced financial success and stability for years can suddenly find that their good credit is in jeopardy for another reason: a lack of financial planning before, after and during a divorce.
In many cases, credit card debt is the culprit for lowering a person’s credit score. People who have been married for years likely have numerous accounts that list both spouses as authorized users. If an authorized user racks up a bunch of charges and fails to pay the bill, the joint owner of the account will be held accountable. Divorce can get acrimonious, making it not completely out of the question that someone would intentionally inflict financial pain on his or her ex-spouse.
There are several actions that spouses or divorced parties can take before, during and after a split to protect their credit. First, separating spouses should contact their credit card companies and have their spouse removed from their accounts. In the case of joint accounts that prohibit removal, the partners should make every attempt to pay off the debts before filing for divorce or transfer balances on joint accounts to individual accounts that each party agrees to take responsibility for.
Spouses also need to agree on whether major assets will be kept or sold. If one spouse intends to live in the home, the parties must decide who will pay the mortgage. The same goes for car payments and outstanding credit card balances. After the divorce, the partners need to keep a close eye on their credit. This means that they must take additional steps to ensure that joint debts are being paid on time by the party who agreed to pay them by requesting copies of billing statements and checking their free credit report every four months.
When most get married, they don’t consider that divorce will ever be in their futures. It might sound crazy that a split could ever get ugly and your credit score will take a hit, but it can and does happen. A credit score has a big impact on a person’s life. Divorce is a time for a fresh start, and protecting one’s credit will make that fresh start easier.
Fox Business: “How to Protect Your Credit During Divorce,” Aug. 10, 2011