Protecting Your Credit during Divorce

 Posted on September 18, 2015 in Divorce Finances

Many recently divorced people find themselves establishing a new life. Transitioning from a life with a partner's support to one where you are one your own can be difficult, but most post divorcees find it much needed and refreshing. They may buy a new home, change jobs, relocate to a different state, or make other serious life changes. The last thing any post divorced person wants to deal with is financial restrictions due to a bad credit score. Unfortunately, many people going through a divorce are forced to deal with separating and protecting their credit from their former spouse. Below are steps you can take to ensure that your credit score remains in tact when you need it most; as a newly financially free single person.

Why Credit Matters during Divorce

While most of us hope that our divorce goes amicably, that is not always the case. Going through a divorce can bring about a spectrum of emotions; anger, regret, sadness, guilt. You do not want your soon to be ex spouse's emotions taken out on your credit score. Many people report that their ex-spouse intentionally tried to destroy their credit score simply to hurt them. The last thing you want is an emotional ex trying to harm your credit score when you need it most. After divorce, you may need a new car, to pay rent on a new apartment, and open new lines of credit, all things that require your credit score be in good standing to begin with. Do not let your spouse stop you from financial independence. No one should be in control but you.

Inventory Your Shared Credit

Most married couples open up various types of "joint credit" during their marriage. A joint account means one that both spouses are co-signers on, thus both are responsible for paying off the debt. For couples that have been together for significant amounts of time, remembering all of your joint lines of credit can be tough. The easiest solution is to pull your credit report and take stock of every line of credit you are attached to. A credit report will show all of your joint accounts as well as your individually owned lines of credit.

An individual account means that solely the owner is responsible for paying back the debt. There are, however, many states, like Texas and Arizona, known as "community property states." In these states, any debt accrued during your marriage, either jointly or individually owned, can be considered the responsibility of both spouses. Be sure to explore your individual state laws to determine exactly who is responsible for all of your debts. Also keep in mind that you may see credit cards with "authorized users" meaning one spouse had the ability to spend using the card, but is not responsible for the debt.

Separate Your Debt

Once you have taken an inventory of your shared and individual debts, the next step is to untangle yourselves from each other. The first step is removing any "authorized users" from your lines of credit, and ensuring that you are removed as an authorized user from your spouse's lines of credit as well.

You and your spouse can do this together prior to your divorce if you are on good terms. Otherwise, in most cases, you can simply call the credit card company and have them remove any authorized users, or have yourself removed from cards you are authorized to use. It is important that you do remove yourself as an authorized user from your spouse's cards as well, as they could end up impacting your credit score in the future.

For joint accounts, do the best you can to separate and split debts with your spouse. Many people do not realize that even though their divorce is official, both spouses are still responsible for any unsettled shared debt. Try your best to pay off joint accounts and close them before starting the divorce process.

Other options include splitting and transferring credit card balances to new, individually owned cards that you both can pay off separately post divorce. If you must proceed with your divorce while still sharing debt, be sure to spell out exactly who is paying for what in your divorce agreement. While this will not stop creditors from coming after you if your spouse misses a payment, at least you will be able to turn to the court and your previously established divorce agreement.

Remember to keep careful track of your joint debt after divorce, and keep an eye on your own credit score closely as well. If you notice your spouse has not paid for a portion of the joint debt they were supposed to pay, notify your attorney right away. Do not wait until your credit score is in jeopardy.

Set a Post Divorce Budget

Transitioning from married life to being single is difficult. As a newly single person, your income level can drastically change, and so can your lifestyle. Before embarking on your own, set a realistic budget for what you can and can not afford. Consider the essentials first, such as housing costs, utilities, and car payments. Once you have calculated all of your expenses, determine how realistic it is for you to afford them all on your own. If you are at your financial capacity, it may be time consider cutting luxuries like cable television. While making those types of cuts can be painful, your future credit score will thank you for not over extending yourself early on in your financial freedom.

Divorce is a tough process. Having the help of a qualified DuPage County divorce attorney can be crucial. Contact the law office of Stock, Carlson, Flynn and McGrath, LLC at 630-665-2500 to speak to an attorney today.

Source:

http://www.bankrate.com/finance/debt/5-steps-protect-credit-divorce-2.aspx