Is Divorce Bad For Your Credit?
Divorce is something that is bound to have some financial impact on your life, but will it be bad for your credit? While a divorce may not be the direct cause of bad credit, certain issues related to your divorce could have an incidental impact on your current credit.
What Could Hurt My Credit In A Divorce?
While many things could hurt your credit, simply getting divorced isn't one of them. That being said, several issues surrounding your divorce can lead you to have bad credit if you're not careful. For example, having shared bills after divorce could put your credit at risk. These may include joint credit card bills, mortgage payments, student loans, and more. Even if you both decided or a judge ruled in court that your former spouse is to be entirely responsible for paying any one of these bills, your name may remain associated with them. If your former spouse fails to pay any of these bills, it could be bad for your credit. Same goes in the case where you're unable to pay bills that you're responsible for. Also, leaving any joint credit cards and other shared accounts open could put your credit at risk. If your former spouse is abusing a line of credit that is under your name, you may be liable for paying their debts.
How Can I Protect My Credit?
While a divorce can have an enormous financial impact on your life, your credit is yours to maintain. Know where your credit score stands today, and watch it as you move through your divorce and after. Close your joint accounts as soon as possible to avoid issues down the road that could hurt your credit. If you've never had a credit card that was entirely your own, now is the time to sign up for one to build your own credit. Be determined to maintain good credit now so that you'll have more financial freedom into the future.
Decide how to handle any shared bills you still have leftover. In some instances, one person may buy out the other person's share and become fully responsible for something like a home mortgage or a car loan. In other instances, one person may be deemed responsible for covering a bill, or both parties involved may maintain joint responsibility for paying it. If your credit is still directly attached to any joint bill after divorce, monitor its payment status. Using a shared expenses and payments register that you can both access will help you each to oversee the status of these bills. It can also help you to attain reimbursements from your former spouse if you covered the cost of a bill they are responsible for in some way. This is often the case for divorced parents who share the responsibility of covering their child's expenses.
Even though a divorce itself won't be bad for your credit, so many scenarios that could manifest through a divorce could negatively impact it. While this information may be useful for many, working with a financial professional who specializes in divorce can help you by offering more tips and give you the best guidance for your situation in particular. Click here to check out financial planning resources in your area.