Since divorce is associated with the separation and unmingling of assets, it’s easy to lose sight of the fact that your ex-spouse’s financial decisions and situation can impact your credit score both during and after divorce proceedings. Credit score issues that result during divorce are typically related to joint account holdings. When you are listed as a joint owner, cosigner or even authorized user of an account, your credit score is impacted by what happens with that account.
My divorce decree specifies who is responsible for accounts that were opened during my marriage. Isn’t that enough?
No. A divorce decree does not break any of contracts you have with lenders–it is only an agreement between you and the court. If your ex-spouse does not make or is late with payments on a joint account, even if the divorce decree specifies it is his or her responsibility, it will appear on both of your credit reports. If your name remains on the account, the effect of divorce on credit score can continue for years after your divorce is finalized.
In some cases, a vindictive spouse may even run up large balances on joint accounts with the intention of causing damage to the other spouse’s credit.
What can I do?
Once the divorce is underway, pull your credit report and contact all of your lenders. Do not wait until your divorce is finalized–considerable damage can be done in a short amount of time. Also, do not assume that you remember all of your joint debt holdings. What about that credit card opened years ago, but not currently in use?
Close any accounts that list you as a joint owner, cosigner or authorized user or have your name totally removed from the account. Banks can transfer the debt to the name of the individual who will be responsible for paying it. Once the divorce is finalized, be sure your credit agreements are in line with your divorce decree.
Also, continue to monitor your credit score during and after the divorce to protect against any activity that may be negatively impacting it.
Make sure that you include in your marital settlement agreement a credit rehabilitation clause. The advantage of such a clause is that it permits a financial expert to attach a money figure to the harm to an innocent spouse credit. Such a financial calculation permits a judge to award money damages to the innocent spouse. These money damages can total tens of thousands of dollars. In that fashion, you may be able to actually protect yourself financially from a spouse or ex-spouse who intentionally or unintentionally damages your credit score, causes credit card cancellations, withdrawal of mortgage refinance offers, and blocks the financing by you of the purchase of new assets.
Divorce is difficult enough without adding unnecessary problems. By remaining vigilant and consulting an experienced attorney to ensure all of your interests are protected, you can avoid a hit to your valuable credit score.
Board Certified Marital and West Palm Beach Family Law Attorney Charles D. Jamieson understands that divorce is an extremely sensitive and important issue. Thanks to extensive experience and a focus on open communication, Attorney Jamieson adeptly addresses the complex issues surrounding divorce while delivering excellent personal service. To discuss financial issues related to divorce, please contact The Law Firm of Charles D. Jamieson, P.A. online or call 561-478-0312.