Divorce ends a marriage but it does not instantly dissolve all financial connections. When you’re going through the emotional turmoil of a divorce, the impact on your credit may be the last thing on your mind. It’s important, however, to understand how divorce may affect your credit.
In many cases, your divorce settlement will decide many key financial questions such as how you’ll divide assets and who is responsible for joint debts incurred during your marriage – you, your ex-spouse or both of you. Once these issues have been decided, you’ll need to work toward establishing your credit as a newly single person.
Common steps include:
Establishingliability for joint accounts – Different credit grantors have different policies regarding divorced couples and joint accounts. It will probably be necessary to contact each of your creditors to discuss who will be responsible for the account going forward – you, your ex-spouse or both.
Transfer of joint debt – Your divorce settlement may detail how you’ll divide joint debt, but before they agree to release one party from liability, creditors may want you to prove you or your former spouse can handle a debt alone. You may need to negotiate an agreement with the creditor.
Close joint accounts – It’s a good idea to close or suspend joint accounts right away, before the divorce is finalized. Unfortunately, more than one person has run up debt on a joint account when they know the marriage is over but the divorce is not yet final.
Notify creditors of the divorce – Once your divorce is final, you should no longer be responsible for new debt that your ex-spouse takes on. Let creditors know the status in writing, via certified mail, and keep a copy for your records.
Once your divorce is finalized, you can do a lot to build your individual credit going forward, including:
Pay bills on time, as agreed to in the divorce settlement.
Obtain a credit card in your name to further build your individual credit history.
Pay off credit card balances every month and avoid running up debt you can’t afford.
Monitor your credit report to ensure it accurately details your credit actions as an individual, and that your ex-spouse’s financial decisions aren’t affecting your individual credit.
Divorce can mean a new start – for you and your credit. It’s important to stay engaged with your credit and establish good credit habits for your new life as a single individual.