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How to Rebuild Credit After Divorce

by Ana-Maria Sanders   January 20, 2020

Divorce can cause damage months down the line in situations where your credit is involved.

The process of going through a divorce can be both physically and mentally tolling. It can affect you, your former spouse, and your family — plus all the assets you had obtained and owned together during your previous relationship.

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What you don’t tend to realize right away after getting a divorce is how it can affect your credit score.

Your credit after divorce can be impacted in monumental ways, and it may not necessarily be the first thought that crosses your mind when you’ve made the decision to divorce from your spouse. But it is immensely important to consider how divorce can affect your credit.

Keeping Amiability After A Divorce

Divorce affects on credit.

In many cases, after having a divorce, it can be extremely hard to keep amiability between one another or even to be able to have a friendship. Most of the time, one finds it hard to be around the other person when it seems too easy for the other to lose control of their emotions. There can be too much anger or spite that comes out of a divorce after what has felt like a long battle.

However, from the very beginning of first filing for a divorce, it would be best to try to keep any decisions in moving forward as amiable as possible.

The reason for this is that it’s too easy for anger and irrationality to overcome rational thinking when deciding how to move forward in situations where financial stability can easily take a hit. That anger and irrationality could easily have a fatal impact on your credit after a divorce.

It’s also important to consider the fact that sometimes an ex-spouse, feeling the need for revenge, will intentionally miss payments or not keep a financial promise they had previously made.

This vindictiveness can be an issue if an ex-spouse still has access to any accounts that involve your personal credit. They would be able to rack up debt quickly if they wished to do so. This is very common in cases where there are authorized users as those users can spend as much as they want on credit cards and zero consequences will be had.

The Severance of Your Joint Account

The financial consequences of divorce can really come to light when there are issues that come from joint accounts. Joint credit accounts can stay on your credit reports long after a divorce and are often tied to your home mortgages and credit cards.

When opening a joint credit account, the account becomes an obligation and will be added to the credit reports of both parties, depending on lender policy.

It is best to deal with the joint account prior to divorce either by closing the account completely or ensuring that a name has been removed from the account entirely. During divorce proceedings, a judge will address a joint account if there is one and may ultimately decide to make one spouse responsible for the joint debt that still needs to be paid.

The lender of the joint account will still expect both parties tied to the account to pay back any money borrowed, plus interest, as previously agreed upon.

If this happens and the responsible party fails to make the payment, that late payment can appear on both credit reports and will have a damaging impact on both credit scores for a very long time.

Division From a Divorce Decree

When a judge gives his final ruling, he or she will divide any assets or debts you and your partner had gained while bound in marriage. When assets are divided among spouses, it is not uncommon to see a situation where one spouse might take more income or assets but also end up taking more of the debt. A divorce decree will divide property, give the final word on child support and alimony, and assign all financial obligations and responsibilities to each of the former spouses.

That’s why, at some point in the divorce process, it is best that both spouses attempt to move forward by disclosing their financial accounts and any outstanding matters with each other. This ties back to how, if there is no attempt at amiability or discussion, it’s too easy for emotions to come out and for any rage and revenge to take over the situation quickly.

The judge will also make a decision when the time comes as to which spouse is responsible for paying each creditor. This is truly one of the circumstances where credit after divorce can hurt the most as creditors will not honor divorce decrees if a payment is late.

After the judge has made his or her decision, if the responsible spouse is unable to fulfill the due payment or isn’t willing to pay, then the other person on the joint account may have their credit negatively affected.

Income is Down to One

Losing one of two of the contributors to your household income can take a swing at your credit score if you’re not careful. You may suddenly find yourself facing missed payments on credit cards, loans, and monthly household bills. Missed payments can still occur years after divorce if you’re not keeping a close eye on your credit report. If they are not taken care of, missed payments can hold a spot in your credit history for several years.

After losing a significant contributor to your income, you may suddenly find it hard to keep up with your bills. It is entirely possible as well that you may even have trouble covering the payments that are due from your long carried out divorce.

Late payments can also arise when relying too heavily on credit cards, which is known as high credit utilization. Payment history alone is the most important factor that can affect our credit scores.

Other Ways a Divorce Can Hurt Your Credit Score

  • You may suddenly find yourself looking at refinancing your home after a divorce. This will require a hard credit inquiry, which will hurt your score temporarily.
  • It is possible your ex-spouse didn’t disclose all debt and financial matters, which can cause the splitting of debt to be uneven. It is also always entirely possible that one spouse will not pay the share that was agreed upon.
  • Many people report that losing the other half of their household income after their divorce turned out to be the greatest impact on their finance as well as their credit. If one spouse was making more money than the other and accounts have been separated, your credit card company could lower your limits.
  • Finally, a divorce can be especially tough on women’s credit. Females are often disproportionately affected in their credit after a divorce. Women, on average, earn less than men and this leads to women bringing home the lesser amount of the family’s household income. And if you’ve primarily been a stay-at-home mom during the time of your marriage, it will very likely take time to get on your feet and get settled again.
Ana-Maria Sanders   LoanStart Marketing Manager
Personal Finance
Ana-Maria Sanders has always enjoyed helping people manage their finances. She has fond memories of helping her grandma cut offers out of the newspaper. As the main content writer and marketing manager for LoanStart, Sanders continues to help guide people through the complicated world of personal finances. She especially likes teaching people how to borrow and pay back loans.