This article was reviewed by Marguerita Cheng, a member of the Finder Editorial Review Board and award-winning advocate for ethical financial planning for over 20 years.
Whether it’s amicable or not, divorce is stressful — and it can take a toll on your finances.
Since your marital status isn’t listed on your credit report, divorce doesn’t directly hurt your credit. However, financial issues that come with separating from your partner can cause your credit score to drop.
Learn how to protect and rebuild your credit during and after a divorce.
The act of divorce doesn’t damage your credit, but the financial issues that stem from divorce can have an indirect impact on your credit score.
These factors can cause your credit score to drop.
Your joint accounts are unpaid
Married couples tend to have joint accounts. You may share a mortgage, credit card, car loan or other forms of debt with your spouse. The debt doesn’t go away when you get divorced. Even though you’re not together, you’re both still responsible for paying it off. In most cases, the divorce decree will designate a spouse to take over each account. For instance, you may be responsible for the mortgage, while your ex-spouse is in charge of the car loan and electricity bill.
The problem is: Despite what the divorce decree states, no one can force your ex to pay.
If your ex-spouse misses a payment, makes late payments or stops paying altogether, it won’t just impact their credit score. Since it’s a joint account, you’ll both get a black mark on your credit report.
To prevent your ex from hurting your credit out of spite or forgetfulness, aim to close joint accounts or transfer them to your name as soon as possible.
Did you live in a community property state?
If you and your spouse lived in Arizona, California, Nevada, Texas, Idaho, Washington or Wisconsin, any loans your spouse took out during your marriage may be considered your debt — even if you didn’t sign the paperwork and the account isn’t listed on your credit report. If payments are missed or skipped, the lender may be able to sue you. That can damage your credit score.
Your ex was an authorized user on your credit card and racked up debt after the split
This is very common in nonamicable divorces. If your ex-spouse is feeling vindictive, they may try to punish you by using your credit card to make large purchases in your name or accessing your bank accounts.
Since your ex is an authorized user, they can legally do this — and they’re not liable for payment. In other words, they can spend hundreds or thousands of dollars without consequences.
You’ll be responsible for paying off that debt. If you can’t afford to, it can hurt your credit score and your ability to successfully apply for credit in the future.
You’re having trouble keeping up with bills
Life is expensive. During a divorce, you may find yourself falling behind on bills and struggling to pay for your living expenses — especially if your ex-spouse was the primary breadwinner.
This can hurt your credit score if it causes late or missed payments. Your payment history is the most important factor of your credit score, so it’s important to make payments on time, every time.
If you’re supplementing your income — or lack thereof — with credit cards, you may end up with a lower credit score. Ideally, your credit utilization ratio should be less than 30%.
You’re using your credit card to pay for divorce costs
On that note, swiping your credit card for legal expenses can ding your credit score. While all divorces come with fixed costs, such as filing fees, the other costs can vary wildly. Lawyer fees depend on the complexity of your case and the degree to which issues are contested. If you’re dealing with custody or property disputes, your divorce may cost thousands of dollars — and most people don’t have that kind of cash on hand.
You have to refinance your home
Let’s say you decide not to sell the family home. To move the property into your name, you may have to refinance the mortgage. This requires a hard credit inquiry, which can lower your credit score. Without your partner’s income, you may find you have trouble qualifying.
On the flipside, if you don’t refinance, you and your ex will be responsible for the mortgage repayments. The person who moves out may have a hard time qualifying for a second mortgage to buy a new home.
Your credit limit is decreased
Most credit card limits can be decreased at the creditor’s discretion. Once your accounts are separated, your creditor may decide to lower your limit if it discovers you’re now making much less money. That change can affect your credit score and can cause you to reach your maximum limit quicker than usual.
How to protect your credit during divorce
Your credit score may not be front of mind during your divorce, but it pays to be proactive. By keeping your credit score in tact, you’ll protect your money and make it easier to start your new, independent life.
Here are a few strategies to follow:
Pull your credit report to analyze which accounts were shared. Knowledge is power. Carefully read each line of your credit report for discrepancies and to find out what accounts you’re partially — or fully — responsible for. It’s not uncommon for spouses to open accounts in their partner’s name. You can get a free copy of your credit report every year from AnnualCreditReport.com.
Separate all joint accounts. Once you’ve established that you’re getting a divorce, close your joint accounts or switch them to individual accounts as soon as possible. This makes the financial transition a little smoother.
Change your security information. Add an extra layer of security by changing the PIN on your debit and credit cards, and the password on the sites and apps for your bank account. Switch up the security questions so your ex-spouse can’t easily answer them. And if you’ve already moved out, update your address so your credit reports and bank statements are delivered directly to you. Better safe than sorry!
Come to an agreement about joint debt payments. Work out the specifics, with or without the help of a divorce decree, and get it in writing.
Adjust your lifestyle to match your income. Many divorcees struggle financially to maintain their lifestyles after losing another person’s income. Unfortunately, it’s likely you’ll need to downsize or cut back on your spending. For example, you may move from a house to an apartment, get rid of cable or sell your car to buy a less expensive one. Create a budget to figure out what you can and can’t afford. Prioritize your most important expenses and stay on top of the payments that have a direct affect on your credit score, like loans and credit cards.
Increase your income. The goal is to earn more and spend less. Along with decreasing your expenses, try to increase your income by working overtime or freelancing on the side.
Monitor your ex’s payment due dates on joint accounts. If your ex fails to pay on time, protect your credit by making the minimum payment on the joint account. You can report the nonpayment to the courts later to recover your money.
Add provisions to your settlement. In your settlement agreement, make sure your attorney includes conditions that protect you from potential credit damage in the future. For example, if your spouse was awarded the family home in the divorce, you can add a provision that declares the home must be refinanced within three years; if not, it must be sold. This gives your ex enough time to remove your name from the loan and means you can take them back to court for contempt if they don’t comply.
Will divorce show up on my credit report?
No. Your marital status — and therefore, your divorce — is not listed on your credit report. That’s a credit myth. You and your spouse each have your own credit report, which contains information that identifies you and determines your credit risk.
If you reverted back to your maiden name, you may see your old and current names on your credit report. To avoid this, update your name on all loans and accounts.
6 tips for rebuilding credit after divorce
Divorce is a fresh start, and having healthy credit can make it a little easier, especially if you want to rent or buy a home, apply for a credit card or qualify for a loan.
These tips will help you repair or rebuild your credit history after a divorce:
Open a checking account in your own name, and deposit your paychecks into it. The savings account ensures you’re only spending money you already have and serve as security for your line of credit later.
Change your last name before getting new credit. If you’re planning to go back to your maiden name, change it before you begin applying for new credit. This way, your new accounts will be issued in your new legal name. Also, contact creditors to change the name on your existing accounts.
Get a secured credit card. The key to building good credit is proving you can handle credit responsibly, and secured credit cards are great for that. Apply for a low-limit card, borrow only what you can afford to repay and try to keep your credit card balance below 30% of the limit. Compare your options with our guide to the best secured credit cards.
Pay your bills on time. The goal is for your credit score to reflect your personal finances and financial planning, and consistent payments boost your credit history.
Make the minimum payment on your credit card every month. Miss one payment and it stays on your credit profile for up to seven years.
Don’t apply for more than one or two credit cards at a time. Too many applications can harm your credit score. If you just got a credit card, wait six months before applying for another one or asking to increase the limit.
Signing the divorce papers won’t cause your credit score to plummet, but the financial mess that often follows can. This is because many spouses’ finances are intertwined, or one spouse earns more than the other. Read our full guide on divorce and protecting your finances during and after.
Frequently asked questions
It depends on two things: state law and whether you and your spouse agree on the terms of your divorce. If you both agree to an uncontested divorce, you may not have to appear in court. For more details, check out our guide to getting divorced online.
Typically, yes. The divorce decree divides shared debts between you and your spouse. For instance, it may stipulate that you’re responsible for paying the auto loan, while your spouse is responsible for mortgage repayments. While the divorce decree specifies who will take over the accounts opened during the marriage, it doesn’t actually separate the accounts or break the contracts with lenders. You’ll have to do that yourself.
A divorce decree doesn’t override your responsibility to a lender. Let’s say the court orders your spouse to pay the bills for a certain account. If the account is still in your name, any late or nonpayments can impact your credit.
No. Thanks to the Equal Credit Opportunity Act of 1974, it’s illegal for creditors to discriminate based on marital status.
That wasn’t always the case: Up until then, credit bureaus would include your marital status on your credit report, and it was more difficult to get credit if you were unmarried or divorced.
These mistakes can lower your credit score:
Utilizing 30% or more of your credit. Ideally, your credit utilization ratio should be less than 30% of your limit.
Missing or making late payments.
Closing old, healthy credit accounts.
Forgetting to monitor credit reports for inaccuracies.
Katia Iervasi is a staff writer who hails from Australia and now calls New York home. Her writing and analysis has been featured on sites like Forbes, Best Company and Financial Advisor around the world. Armed with a BA in Communication and a journalistic eye for detail, she navigates insurance and finance topics for Finder, so you can splash your cash smartly (and be a pro when the subject pops up at dinner parties).
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