A divorce involves a complete upheaval of your financial life since you are transitioning from having two incomes to one. In fact, the divorce code views a divorce primarily as a “financial break-up.”
One of your biggest concerns as you move forward into your newly single life is if your divorce will affect your credit score. You may have good credit that you want to protect, or poor credit that you do not want further harmed by your divorce.
This is a valid concern, since having a good credit score makes it easier to buy a house and get approved for loans, both of which you might be looking to do after your divorce.
Divorce itself does not directly affect your credit score
The good news is that divorcing itself will not impact your credit score. Your marital status has no effect on your credit score.
However, some aspects of your divorce could still end up damaging your credit score. Your divorce agreement or Order of court on marital debts and assets likely lists which spouse is responsible for paying which marital debts.
Your spouse may agree to make payments on a joint credit card after or during your divorce, sometimes even without your knowledge, and fail to make those payments. These missed payments can lower your credit score if your name is still on the account. This is a common scenario as it relates to mortgage liabilities where a divorce agreement or Order fails to address a mortgage in the event the owner of the mortgage, if in one spouse’s name, does not keep and or is not awarded the marital residence. If the agreement or Order fails to address a refinancing of that mortgage, missed payments will affect the credit score of the mortgage owner if the spouse living in the residence is also not the owner name on the mortgage account.
Remove your name from any joint accounts
Creditors do not honor divorce agreements. If your name is still on an account and payments are not made, this will reflect on your credit score. You can avoid this by taking your name off any joint accounts immediately after your divorce if your spouse is responsible for paying them.
Additionally, living on one income and no longer sharing expenses can cause your credit score to suffer if you find yourself unable to pay your monthly bills. Setting up a budget, cutting expenses where you can and living frugally can help you avoid missing payments.
Pay attention to your credit reports
Obtain your credit reports after your divorce and regularly monitor them. You can then identify and investigate any changes as soon as possible.
Overall, although divorce will not directly harm your credit score, it is important to consider these indirect ways your credit score can be affected.