Credit and Divorce Lawyers

Divorce might harm your credit score. The type of accounts you had while you were married will determine how divorce affects your credit.

Individual Accounts

You open these types of accounts on your own. Any balance due on these accounts is solely your responsibility. These accounts may also appear on your spouse’s credit report in jurisdictions where community property is allowed because your spouse may also be accountable. Individual Accounts are the least likely to experience credit issues after a divorce.

Joint Accounts

You and your spouse must always ensure that the debts associated with a joint account are paid. Both spouses’ credit reports show joint accounts. A former spouse’s credit report may be harmed if the debt was accrued on a joint account and was not paid.

User Accounts

Individually opened accounts frequently give the credit holder the option to conveniently add authorized users. When a creditor submits a credit history to a credit agency, they must include both the user’s identity and the name of the major creditor.

People who cannot obtain credit on their own can profit from these accounts (e.g., students or homemakers). The credit holders, not the credit users, are contractually obligated to pay the debt, even though these individuals may utilize an account.

Is Your Credit Score Affected by Divorce?

Changes in your marital status do not affect your credit because your credit report does not indicate whether you are married, single, or divorced. However, how you manage joint accounts with your ex-spouse could impact both of your credit reports.

Joint Accounts Continue to Show Up on Your Credit Report

Suppose you are listed as a joint owner, cosigner, or authorized user on an account. In that case, you must take care of that account before the divorce because accounts are reported for each person affiliated with them. That entails canceling the account entirely or taking other steps to ensure your name or your ex-partner’s name is completely erased from the account.

Regardless of what other agreements may say, as long as the account is open and has both of your names on it, you are both legally liable for it.

Does a Divorce Decree Revoke a Loan Agreement?

When it comes to your agreements with lenders and creditors, your divorce order only has a limited amount of authority.

Although a divorce judgment may state who is in charge of accounts opened during the marriage, it does not annul agreements made with lenders. A divorce order only establishes who will be responsible for each debt by an agreement between the divorcing spouse and the court.

The late payments will continue to appear on both credit reports and will have a negative effect on both parties’ credit scores if the spouse who is required to make payments under the terms of the divorce decision is unable or unwilling to do so and the lender has not modified the contract.

Even if the missed payments happen years after the divorce, both of the people connected to the account will still be recorded. If you haven’t handled the account properly, that might definitely be an unpleasant surprise.

In some situations, one spouse’s or the other’s vengeful actions during the divorce might have a very immediate, very bad effect.

Sadly, an enraged spouse may make substantial credit purchases on joint accounts to punish the other person with astronomical bills or ruin their credit history in an effort to harm their soon-to-be ex-wife or ex-husband.

They typically fail to realize that by doing so, they are also quite likely to damage their credit history.

After a Divorce, is a Mortgage Removable?

Credit reporting agencies are unable to delete an account from your credit report if you and your ex jointly own it. Even though your divorce decree places the burden of payment on your ex, you are still responsible for the loan.

It’s not ideal to keep your mortgage with your ex-spouse. Both your credit record and theirs will still reflect the loan, which may make it more difficult for either party to obtain a new mortgage in the future.

Your credit will be harmed if your ex is late on payments or worse, defaults. A joint mortgage is a continuous obligation that you might prefer not to share or that might make things more challenging in the future.

However, getting rid of one or the other spouse from a mortgage isn’t always easy. Your lender probably won’t be willing to just drop one of you from the loan if you both qualify for it. Instead, you might need to refinance, sell your house, or pay off the debt to make a clean split.

How Can I Prevent a Divorce from Harming My Credit?

You need to take extra care to prevent your credit from being damaged. You can take the following steps to safeguard yourself:

1. Pay close attention to how your accounts are doing.
2. It’s crucial to make timely payments on joint accounts if you don’t want your credit score to fall.
3. Close any shared or user accounts.

Demand that certain joint or user accounts be changed to individual accounts from your creditors. A joint account cannot legally be closed because of a divorce, although it can be done at either spouse’s desire. You might need to reapply in some circumstances to open an account in your own name.

Why Women’s Credit May Suffer More After Divorce

Divorce doesn’t directly affect your credit reports or scores, as was already established. In fact, neither your gender nor your credit is affected by anything. Lenders are absolutely forbidden by the Equal Credit Opportunity Act (ECOA) from employing credit scoring methods that discriminate on the basis of gender, age, race, or any other category.

However, because divorce may result in financial difficulties, it might indirectly affect your credit.

Financial issues during a divorce may have a disproportionately negative impact on women.

Because women typically earn less than men do, divorce may have a particularly severe financial impact on them.

According to data from the Bureau of Labor Statistics, men made an average full-time weekly compensation or salary of $991 in the fourth quarter of 2018. In contrast, women made an average of $796 during the same time period, or nearly $200 a week less than men.

According to figures from the U.S. Census Bureau, recently divorced women report lower household incomes than recently divorced men.

Experian-commissioned research also reveals some startling findings about how divorce affects men’s versus women’s credit. 54 percent of divorced women claim their credit score dropped while they were married, according to the survey. About 50% of the women who responded to the poll also indicated their ex-spouse harmed their credit.

Moving Forward

Going through a divorce is a financially trying period. However, you can keep your options open while reducing risk and harm if you take steps to preserve your credit, organize your loans and credit accounts, monitor your credit activity and score, and attempt to develop or repair your personal credit.

Should I Get in Touch with a Lawyer?

Keeping your credit from being negatively impacted by divorce can be challenging. An experienced divorce attorney will know how to organize your legal divorce settlement in the greatest possible way to protect your credit.