Getting Divorced? Protect Your Credit

During a divorce, your credit score may be the last thing on your mind. Unfortunately, failure to account for your credit score may result in significant damage to your credit profile. Most marriages involve commingling of assets and accounts. Many people focus on the assets but fail to understand the impact of how marital debts are resolved. To protect your credit score during a divorce, first consider the type of accounts involved, joint or individual.

With an individual account, your creditor only considers your credit profile when deciding if they want to lend to you. You can have an individual account if you are married or if you are single. In most states, the account will appear only on your credit reports and the reports of any authorized users (authorized users can be added to individual accounts). If you live in a community property state, both you and your spouse may be responsible for debts incurred during the marriage and one spouses accounts may appear on the other spouse’s credit reports.

Individual accounts are best for someone for qualifies independently. Since no one else can negatively affect these accounts, you remain in control of the status of your accounts. However, if you do not qualify independently, individual accounts may not be an option. In most divorce proceedings, individual accounts are easy to separate.

The individual listed on the account is the sole party responsible for the obligations under the account. Exceptions can occur, of course, when debts are incurred on individual accounts for martial obligations. Issues surrounding authorized users can also complicate resolution of individual accounts.

In a joint account, both your financial history and your spouse’s financial history are considered by your creditor. Both parties are responsible for the debts, no matter who is responsible in the relationship for earning money and bill paying. For example, if a marriage consists of one spouse that works outside the home and one spouse that works as a homemaker, both are responsible for the debt even though only one has income from outside the house. A creditor that reports a joint account must report it on both parties’ credit reports.

Joint accounts are typically more difficult to resolve in divorce proceedings. Former spouses can potentially harm their ex-spouses credit score by neglecting joint account responsibilities. Of course, their own credit profile will be harmed in the process. One spouse may take advantage of the other spouse by failing to pay bills on time or by excessive spending even after the divorce is final. As such, it is important to resolve the joint accounts in the divorce proceedings.

When it comes to your joint accounts, you have some options. You can close the joint accounts. This can have an impact on your credit score so do it if necessary to protect yourself from a former spouse. The drop in your credit score based upon the closing of an account may be inconsequential when compared to the damage caused by a former spouse.

If possible, resolve all outstanding balances with creditors. This is easier said than done, but if the option exists, you should use it. Not only will it eliminate the debt in question, which will help your credit score, but it will also eliminate the risk of damage caused by a former spouse.

You can also convert some joint accounts to separate of individual accounts. If possible, contact your creditors and see if joint accounts can be separated. This will protect you from former spouse payment and spending abuse and also protect you from drops in your credit score based on the closing of an aged credit line. Keep in mind that a creditor can not close a joint account simply because the parties are divorcing. Likewise, a creditor does not have to separate accounts.

Another option is to place a freeze on joint accounts. When you freeze an account, the balance remains and continues to accrue interest, but future use of the credit line is prevented. This allows the parties to resolve the outstanding balance without having to worry about credit line abuse by a former spouse.

No matter what you decide, make sure you or your spouse make timely payment of all bills to the greatest degree possible. All debts should be resolved in the divorce proceeding so no one is left guessing as to what they are required to maintain.

Ovation Credit Repair Services
Ovation Credit Repair