It is generally understood that divorce can be expensive. But long after the divorce has been finalized, many people are horrified to discover that their credit score has taken a dive. While this problem is certainly associated with divorce, it is not typically caused by divorce costs themselves.
Instead, many divorcees suffer damage to their credit scores for a number of reasons related to joint debt, reduced income and even spousal identity theft. We’ll discuss some of these issues in today’s post.
According to an article in Forbes, your credit score may be at risk in divorce because:
- You have joint debt with your spouse and are held accountable if it doesn’t get paid (regardless of which spouse is technically supposed to pay it)
- You go from a double-income household to a single-come household, often without a significant reduction in bills and expenses
- Your former spouse spends recklessly on a joint account or using your personal financial information
- Both of your names are on a mortgage or car loan, and your spouse ends up filing for bankruptcy (meaning creditors are now coming after you)
Unfortunately, creditors often care little about the terms of a divorce settlement, especially regarding joint debt. If your name is on a legally enforceable contract, you could ultimately be held liable even if you made other arrangements during the divorce. So what can you do to protect yourself and your credit score?
In the Forbes article, financial blogger Emma Johnson tells readers to:
- Remove yourself from any joint accounts that will allow you to do so
- Prioritize paying off joint debts and freeze activity on them (to prevent new charges)
- Regularly check your credit score and credit report, looking for charges or other suspicious activity that may have been initiated by your spouse
- Make sure that your bills always get paid on time to prevent further damage
If you have questions or concerns about how divorce may affect your finances or credit score, please discuss them with your family law attorney. He or she may have ideas or resources that you didn’t know were available.
Source: Forbes, “Getting Divorced? Do Not Ignore Your Credit Score (and How to Rebuild it if You Did),” Emma Johnson, April 8, 2015