Divorce and Your Credit Score
by Ellise Walsh
A sad reality among many
married couples today is that divorces are occurring at an alarming
rate. Perhaps even worse than the destruction of
the marriage are the results that soon follow. Many of the side effects
of divorce involve money, credit issues and far too often personal
bankruptcy. Couples who become divorced are extremely likely to
experience financial fall-out in the months and years following the
divorce. Perhaps this trend is because the couples were experiencing
money problems even before the marriage dissolved, which might have even
led to the divorce. Or perhaps it is just simply too difficult to adjust
from typically two incomes to one and maintain almost the same amount of
monthly debt. Whatever, the reason, there is no denying that divorce and
money problems seem to go hand in hand.
Individuals who are recently divorced or who are thinking
about divorce should take several considerations into factor regarding divorce
and their credit score. Simply obtaining a divorce will not protect someone from
mounting financial problems, even if the other person is primarily to blame.
As soon as it becomes apparent that divorce is about to
occur, or if it has already happened, you should waste no time in informing
anyone with an interest in your financial affairs that your name should be
removed from any joint accounts. This includes banks and credit card companies.
The reason for doing this is that no matter who is responsible for actually
spending the money, both partners share equal responsibility in paying the bills
on jointly held accounts. This means that even if you know nothing about it and
your ex or soon-to-be ex-spouse decides to go out and max out all of the credit
cards, if you have not taken steps to have your name removed from the accounts,
you will remain responsible for the bills; even after the divorce. If you won’t
or you are unable to pay the bills and your ex-partner doesn’t pay the bills,
you will both receive bad credit ratings. While it may not be fair, it is a
fact.
After you have taken steps to have your name removed from
all joint accounts, what you will need to do next is to open new accounts, with
only your name listed. This action serves a two-fold purpose. First, after you
close out all joint accounts, you may have little to no accounts remaining you
are able to access. You will need those new accounts to conduct simple
day-to-day business. Secondly, it is critical that you begin to create your own
credit history, separate from that of your spouse. This is especially important
if you were not the primary wage earner within your marriage. Experts recommend
that you open a regular banking account, a savings account and obtain a credit
card in your own name. A secured credit card is a good option for individuals
who are not able to qualify for an unsecured card. A secured card looks and
works no differently than an unsecured card and it will help you to build up a
good credit score. Also, there is much less temptation to misuse a secured card.
Run a credit check on yourself so you can avoid any
unpleasant surprises. This is especially important if you were not the person to
handle the finances within the marriage. If that was the case, you may have no
idea where your credit score or the credit score of your spouse stands. Even
after you have taken steps to have your name removed from joint accounts,
previous actions of your spouse may still come back to haunt you. While there is
nothing you can do now about bad financial decisions your spouse made while you
were married, at least you can be prepared.
Avoid making any major purchases right away. Individuals
who have been recently divorced have a tendency to make themselves feel better,
and alleviate depression, by making rather large purchases. This is a mistake.
Not only does it deplete financial reserves you may well need for something
later on, but if you are buying on credit it can have a negative impact on your
credit score. Instead, wait awhile until the initial shock of the divorce has
worn off. There will be plenty of time later to think about any purchases you
may want to make.
Finally, begin to set financial goals for yourself. Decide
how much money you would like, and are financially able, to contribute to a
savings account. Think about any major purchases that may be necessary in the
future and how much money you will need to save in order to buy them. Construct
a budget for yourself so that you know exactly
the minimum amount of money you need in order to meet your monthly obligations.
