Marriage is considered to be a rite of passage for most Americans — although it’s not all wedded bliss. The unfortunate truth is that 40% to 50% of marriages in the US end in divorce. In fact, approximately 827,000 divorces happen every year. And while the logistics of dissolving a relationship are many, your heart won’t be the only thing that’s damaged as a result of this separation. Divorce can hurt your credit score too.
Roughly 93% of patients say they benefit from working with a marriage or family therapist. However, not all marriages can be saved. If yours can’t, you’ll need to prepare yourself for a whole host of changes. During such an emotionally charged time, it’s easy to make mistakes or overlook essential steps. But one thing you literally can’t afford to forget about is your credit score.
The good news is that a divorce filing won’t automatically affect your credit score. The divorce itself will really have no direct impact on your credit; it’s the situations that might occur as a result of your divorce that can tarnish your credit. For example, if you and your soon-to-be ex share joint accounts, any problems stemming from late payments will show up on both of your credit reports.
When you go through a divorce, the courts will issue a ruling called a divorce decree. This decree essentially outlines how marital assets and debts are divided and which party is responsible for paying various creditors. However, this decree won’t override the agreements you have with debt collectors and creditors. In other words, even if your spouse is technically responsible for making car payments but they are unwilling or are unable to do so, their late payments will impact your credit score, too.
These late payments can have an effect on your credit score for years. Some vindictive exes may even purposefully try to wreck their spouses’ credit scores (although they’ll damage their own in the process). They may even try to saddle you with debt from joint credit cards and other accounts. What’s more, women often take on a more substantial financial burden surrounding divorce due to the simple fact that women earn less than men do. In addition, one survey found that 54% of divorced women said their credit scores actually declined during their marriage, while approximately half of women surveyed answered that their exes ruined their credit.
While bankruptcies resulting from unpaid medical bills affect an estimated 2 million people in the US every year, many Americans cite divorce as their main motivation for filing for bankruptcy. Given all the costs involved and the division of assets, you’ll have enough financial issues to worry about. That’s why it’s essential to be proactive about your joint accounts prior to beginning divorce proceedings.
First of all, you should request a copy of your credit report. The three major credit reporting agencies allow one free report each year. Examine the report carefully and take note of any accounts you and your spouse share. Then take care of any issues in the report after you separate your finances. Be sure to separate any co-signed loans, co-owned property, or joint financial accounts.
Alternatively, you can also close any joint credit cards or remove your spouse as an authorized user from any credit cards that bear only your name. If most credit was in your spouse’s name, be proactive about building credit for yourself now. Also consider freezing credit reports after you request yours to ensure your spouse can’t open any accounts in your name. After the divorce is final, you can request another credit report to ensure everything is correct. If it isn’t, you can dispute them and have them corrected.
Finally, it will also benefit both you and your ex to cooperate whenever possible. Maintaining a civil relationship during your divorce can eliminate the possibility that your ex might try to seek financial revenge. While an amicable divorce isn’t always possible, it’s always best to work together to avoid the worst case scenario.
With all the emotional baggage that comes with an impending divorce, it may feel overwhelming to also address your financials. However, focusing on these accounts can be a welcome distraction and offer protection in the future.
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If you think it can hurt your credit score badly, you should see what it does to your bank account.
LOL! Good one, Jim. You sound like a man who speaks from experience.
It shows, eh?