How Does Divorce Affect My Credit?

How Does Divorce Affect My Credit?:  Divorce and credit scores are not directly related. Credit ratings are not determined based on a person’s marital status. However, there are several ways in which your divorce may adversely affect your credit.

Divorce itself has a financial aftermath. The spouse who earns more would have to take financial responsibility of his or her former spouse and childcare, if child custody is decreed in favor of the other spouse. If a spouse is financially dependent on the other then after divorce, he or she would be even more dependent. For both former spouses, there are immense financial implications of a divorce. However, none of these affect your credit scores, either directly or indirectly.

What would affect your credit score after divorce are joint accounts, loans, real estate and several debts or financial obligations that you may have had with your former spouse.

For instance, it is common for couples to have joint bank accounts. Credit cards are also mostly held jointly. Mortgages and car loans are typically in the names of both the spouses. All these are financial obligations that the two applicants or account holders, in this case the husband and the wife, are legally liable to pay. If any of these payments are not made or the financial obligations are not met in a timely manner, then the credit scores of both the former spouses would suffer.

Many couples misunderstand the concept of a divorce decree. By order of the court, one of the two spouses might be held accountable for impending financial obligations. It is common for the spouse who has been the higher earner to be liable to pay all the debts and loans which the husband and wife may have taken as a couple. This divorce decree relieves a spouse of paying the debts or attending to financial obligations. However, this divorce decree doesn’t prevent the banks, loan companies or credit card companies to ask for repayment from the former spouse who is not supposed to pay according to the decree. It may so happen that the spouse who is required to pay according to the decree would fail to make payments or would make late payments. In such cases, credit scores of both the spouses would deteriorate. Credit scores are not supposed to function according to the terms of a decree in a divorce.

The best way to avoid a credit rating downgrade during or after a divorce is to separate all joint accounts and to have completely segregated financial profiles.

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