Is Divorce Bad For Your Credit?
Divorce is something that is bound to have some financial impact on your life, but will it be bad for your credit? While a divorce may not be the direct cause of bad credit, certain issues related to your divorce could have an incidental impact on your current credit.
What Could Hurt My Credit In A Divorce?
While many things could hurt your credit, simply getting divorced isn't one of them. That being said, several issues surrounding your divorce can lead you to have bad credit if you're not careful. For example, having joint credit accounts could put your credit at risk if you're not mindful about it during your divorce. Savings being spent on things other than what they were meant for and wiping the funds out of joint accounts are things that could potentially hurt your credit in a divorce. Those who share credit cards with their spouse then decide to divorce could also find themselves financially hurt if they are unaware of how that credit is being used. Even if it was your former spouse that racked up debt on a card you shared, the primary cardholder is liable for that spending. If that's you, you'll be the one who is on the hook to pay up. Same goes for loans and overdrafts on accounts held under your name.
How Can I Protect My Credit?
While a divorce can have an enormous financial impact on your life, your credit is yours to maintain. Know where your credit score stands today, and watch it as you move through your divorce and after. Remove your former spouse from any shared credit cards as soon as possible to avoid issues down the road that could hurt your credit. If you've never had a credit card that was entirely your own, now is the time to sign up for one to build your own credit. Be determined to maintain good credit now so that you'll have more financial freedom into the future.
Decide how to handle any joint bills you still have leftover like a home mortgage. In some instances, one person may continue living in the marital home and should have the mortgage transferred into solely their name. In this case, they will have to demonstrate to the mortgage lender that they can handle it entirely on their own on top of buying out their former spouse's share. A lawyer or financial professional will be able to provide more information to you about this process. If neither of you continues living in the home, sell the house and pay off the mortgage, if possible. While you can resolve to sell but continue paying off the mortgage together over time, this can be messy if you're not careful. If your credit is still directly attached to any joint bill after divorce, monitor the payment of that bill. Using a shared expenses register that you can both access will help you each to oversee the status of these bills.
Even though a divorce itself won't be bad for your credit, so many scenarios that could manifest through a divorce could negatively impact it. While this information can be useful for many, working with a financial professional who specialises in divorce can help you get the best guidance for your situation in particular. Click here to learn more about a countrywide financial planning resource in the UK.