Protect your Credit through a Divorce
Divorces are challenging as there’s a lot to think about in a
short amount of time, usually under pressure. And while
handling finances is often at the forefront of the discussions
related to the separation of assets, unfortunately, managing
and maintaining personal credit can be swept aside to deal with
So, if you happen to be going through or preparing for a divorce
or separation, here are a few considerations that will help keep
your credit and finances on track. The goal is to avoid
significant setbacks as you look to rebuild your life.
Manage Your Joint Debt
If you have joint debt, you are both 100% responsible for that
debt, which means that even if your ex-spouse has the legal
responsibility to pay the debt, if your name is on the debt, you
can be held responsible for the payments. Any financial
obligation with your name on the account that falls into arrears
will negatively impact your credit score, regardless of who is
legally responsible for making the payments. A divorce
settlement doesn’t mean anything to the lender.
The last thing you want is for your ex-spouse’s poor financial
management to negatively impact your credit score for the
next six to seven years. Go through all your joint credit
accounts, and if possible, cancel them and have the remaining
balance transferred into a loan or credit card in the name of
whoever will be responsible for the remaining debt.
If possible, you should eliminate all joint debts. Now, it’s a good
idea to check your credit report about three to six months after
making the changes to ensure everything all joint debts have
been closed and everything is reporting as it should be. It’s not
uncommon for there to be errors on credit reports.
Manage Your Bank Accounts
Just as you should separate all your joint credit accounts, it’s a
good idea to open a checking account in your name and start
making all deposits there as soon as possible. You’ll want to set
up the automatic withdrawals for the expenses and utilities
you’ll be responsible for going forward in your own account.
At the same time, you’ll want to close any joint bank accounts
you have with your ex-spouse and gain exclusive access to any
assets you have. It’s unfortunate, but even in the most amicable
situations, money (or lack thereof) can cause people to make
bad decisions; you want to protect yourself by protecting your
While opening new accounts, chances are your ex-spouse
knows your passwords to online banking and might even know
the pin to your bank card. Take this time to change all your
passwords to something completely new, don’t just default to
what you’ve used in the past. Better safe than sorry.
Setup New Credit in Your Name
There might be a chance that you’ve never had credit in your
name alone or that you were a secondary signer on your ex-
spouse’s credit card. If this is the case, it would be prudent to
set up a small credit card in your name. Don’t worry about the
limit; the goal is to get something in your name alone. Down
the road, you can change things and work towards establishing
a solid credit profile.
If you have any questions about managing your credit through
a divorce, please don’t hesitate to connect anytime. It would be
a pleasure to work with you.