Will Divorce Affect My Credit?
June 23, 2023 | Posted by: Keith Leighton
Divorce and Your Credit Rating
Divorces are difficult because there is a lot to consider quickly, often under pressure. Managing funds is frequently at the forefront of conversations pertaining to the division of assets, but sadly, preserving personal credit might be put off until later.
Here are a few things to keep in mind to keep your money and credit in order if you're going through or getting ready for a divorce or separation. Preventing major financial setbacks is the objective as you work through this difficult time.
Handling Your Joint Debt
If you and your ex-spouse have a joint debt, you are both entirely responsible for it. This means that even if your ex-spouse is legally obligated to make the payments, if your name is on the loan, you could still be held accountable. No matter who is legally obligated to make payments, your credit score will be negatively impacted by any financial obligation with your name on it that is in default. The lender isn’t concerned about your divorce settlement.
You definitely don't want your ex-spouse's poor money management to harm your credit score for the next seven years. Examine all of your joint credit accounts, cancel them if you can, and transfer the outstanding balance to a loan or credit card in the name of the person who will be in charge of paying off that debt.
Paying off any shared debts is advisable. Check your credit report approximately three to six months later to make sure all shared debts have been paid off and everything is reporting correctly. There are frequently mistakes in credit reports.
What About Your Bank Accounts
It is advisable to open a bank account in your own name and begin making all deposits there immediately. Set up automatic withdrawals from your own account for the costs and utilities for which you will be responsible.
Close any joint bank accounts you have with your ex-spouse at the same time, and take sole possession of whatever assets you own. Money may cause people to act badly even in the most cordial circumstances; you want to protect yourself by protecting your belongings.
Change all of your internet banking passwords and the pin for your bank cards. Don't just use the passwords you've previously used; instead, take this opportunity to thoroughly change them all. It’s not worth the risk of having those passwords compromised.
Establishing Credit in Your Name
If you've never had credit in your name alone, or if you served as your ex-spouse's cosigner on a debit or credit card, then it would be wise to open a credit card in your name only. The objective is to obtain credit in your name. You can make changes and endeavour to build a stronger credit profile in time.
If you have any questions about managing your credit through a divorce, please reach out to your DLC Ideal Mortgage professional for expert advice.
