Along with the emotional challenges of a divorce, financial challenges often also accompany a divorce proceeding. In relation to the many financial challenges, one question that often comes to the mind of our San Diego clients is:
How does divorce affect my credit?
The fact that you are now divorced won’t directly affect your credit, credit scores or credit history. This is because your creditworthiness is not based on your marital status. However, divorce can indirectly affect your credit in a number of ways, and usually not in a good way.
Most couples incur joint financial debts during the marriage. These may include credit card debts, car loans, mortgages, etc. While a divorce decree may order one of the spouses to pay off a given joint debt through a court order or settlement, each joint debt is linked to both spouses unless certain steps are taken to sever the union. Therefore, if the party who is ordered to pay the debt makes late payments or just completely fails to pay, both spouses will end up with red flag on their credit reports and as a result their credit scores will likely plummet.
Luckily, there are ways in which you can deal with joint financial obligations between you and your ex-spouse in an effort to avoid a significant negative impact on your credit.
It is very common for married couples to have joint credit card accounts. After a divorce, once the credit card debt has been allocated to one spouse or the other, the best way to avoid a negative impact on your credit score it to make sure that your name is removed from the credit card accounts that you are no longer responsible for. If your name is removed from the credit card then the creditor can no longer seek collection from you. Therefore, if your ex-spouse fails to pay the credit card debt, it will only affect his/her credit and not yours.
One way to get either your name or your ex-spouse’s name off the car loan is to title the car in the name of the spouse who gets to keep it and then have that spouse refinance the auto loan in his or her name only. Refinancing a vehicle is typically pretty easy and once the refinance is done, the spouse whose name was removed will no longer be responsible for the future loan payments.
If you bought a house while you were married, there is a good chance that both you and your ex-spouse are on the mortgage loan. So even if only one spouse continues to live in the home after a divorce, both spouses are still liable to pay the mortgage. Removing one spouse from the mortgage can be a bit tricky but it is definitely a priority if you don’t want your credit to be negatively impacted.
If you are worried about how a divorce may affect your credit score, it may be a good idea to get assistance from an experienced family law attorney to help guide your through the divorce process and insure that you take the necessary steps to avoid a credit nightmare. Nancy J. Bickford is the only attorney representing clients in San Diego, who is a Certified Family Law Specialist (CFLS) and who is actively licensed as a Certified Public Accountant (CPA). Call 858-793-8884 to receive assistance today and take steps to ensure that your credit score is not adversely affected by your divorce.