Saving your credit rating during a divorce
By David Pilley
on December 30, 2011
The modern idea of marriage is two people spending the rest of their lives together because they love each other. It is a binding contract two people sign, and it involves much more than love. It involves a lot of financial planning, something that may not come easy. Lack of funds, unfaithfulness, impotence. Whatever the reason, many marriages end in divorce. The most recent data from the Center for Disease Control and Prevention showed a divorce rate of 50% in 2009, meaning half of all new marriages in that year ended in a split-up. Divorce can lead to a damaged credit rating, so here are some ways to protect yourself.
First, you need to gather all the financial information
you have. Sort all your credit card statements, bank statements, student loans, and your mortgage loan, if you got one. You should also divide the information into what is yours individually and what is a joint debt. If you signed a prenuptial agreement before the marriage, you must follow it to determine how ownership of your previously joint property will be split. There may be clauses in the prenup about how joint lines of credit will be split, but that may only be if you considered this information before the idea of divorce popped up. Even though you are now divorced, you will still need to collaborate with your ex to make sure both of your credit scores remain good.
You should also get a copy of your credit report
if you can’t furnish every single credit card statement. Your report will show every account and whether you are an individual account holder, joint account holder, or authorized user. If you are an authorized user
, you act as a co-signer. This also means your ex could be an authorized user on some account, and he/she could make some excessive purchases on the account out of spite. Though you are responsible for payments, you can be removed from this responsibility. If your ex is an authorized user, contact your creditor and ask to either make it an individual account or close the account to new purchases. Likewise, if you are an authorized user, tell your ex to contact the creditor and ask to remove your name from it.
When dealing with joint accounts
, both of you are “responsible for payment.” You may contact your creditor and ask to remove yourself from responsibility (make it an individual account) or close the account altogether. It would be wise to hold off on closing the account until a zero balance remains; closing an account with balance remaining could make your credit even worse.
Even after divorce, you need to work together
with your ex. Continue making payments on joint accounts until the creditor has changed them to individual accounts or they have zero balance. (Creditors are not actually obligated to change their status from joint to individual, so don’t tell them they have to do so.) Don’t just assume your ex is paying his/her fair share on these joint accounts; remain in contact with him/her and ask for monthly statements showing he/she made the payments. Taking out a new loan to consolidate your debts
may be an option, as well as bankruptcy, but these two options should only be considered as last resorts. Divorce can be messy, but it won’t be a complete financial quagmire if you are mature and take responsibility for your bills.