Divorce and your credit score

 

Written By Ellise Walsh

Tue 3/15/2005 1:21 PM

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 income 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.