Divorce and Your Credit Rating

Divorce is a difficult time in many ways.  Deciding to get a divorce involves taking many issues into account, ranging from emotional to logistical to financial.  Once you’ve decided to take the plunge and file for divorce, you have to choose the right attorney, file in the correct county, and make sure that your spouse is properly served.  During the divorce proceedings, you’ll have to extricate your finances from those of your spouse, discuss a custody arrangement that is best for the kids, and find a new living space, just to name a few.  Finances are frequently at the center of divorce disputes, and can be the issue that results in a failure to reach a settlement.  If you are facing a divorce, you may be wondering how your divorce will impact your credit rating.

Getting a divorce, standing alone, will not impact your credit rating.  In other words, the simple act of filing for and receiving a divorce will not detract from your credit score.  That said, there are other ways that a divorce can negatively impact your score.

One of the most common ways for divorce to negatively impact your score is if a debt with which your name is associated does not get paid on time or at all.  The common example of this is when your spouse is allowed to keep the marital residence, and both of your names are on the mortgage.  If your spouse falls behind in the payments, your credit score will go down.  The mortgage holder and the credit reporting agencies will not care that the divorce decree states that your former spouse is responsible for paying the mortgage – if your name is on the debt, your credit rating will be impacted.  To avoid the mortgage problem, consider requiring your former spouse to refinance or sell the home so your name is not associated with the debt.

Another way your credit rating can be impacted during the divorce is by abuse or misuse of joint checking or credit accounts.  If you and your spouse both have your names associated with checking accounts or credit card accounts, you both have the right to use those resources.  Your spouse could totally drain your checking account and overdraw it, resulting in overdraft fees.  Similarly, he or she could go on a spending spree and max out your credit cards.  Either of these actions can negatively impact your credit, so before you start your divorce, you should consider closing joint accounts.

Call us today at 651-413-9568.  We have extensive experience helping our clients avoid common divorce mistakes that will negatively impact their credit rating.