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If you’re going through a divorce or soon will be, you already know it takes an emotional toll. Unfortunately, you’re probably also all too aware that there are financial ramifications that come with ending your marriage.
While your credit score won’t go down simply because you filed for divorce, there are ways that your credit report and credit score can be impacted. If, for example, you begin to miss credit card payments because you are caught up in the stress of the divorce, your credit score could suffer.
In addition, if you hold joint accounts with your former spouse and there is negative activity on those accounts, such as late payments or payments that have not been made at all, it can show up on your credit report—and it could damage your credit score.
An agreement with a lender trumps a divorce decree
All joint accounts that are in both your name and that of your spouse, including your mortgage, co-signed loans, and joint credit cards, will show up on both of your credit reports and factor into both of your credit scores.
Even if your spouse agrees to take on the debt from some of your joint accounts in your divorce settlement and that obligation is spelled out in your divorce decree, you are still legally liable for the debt. If your spouse fails to make the payments, the creditor will hold you responsible for paying on time and in full.
In order to separate your credit accounts from your former spouse’s accounts, you could close all joint accounts and reopen new accounts in your name only. Before closing any accounts, however, make sure that all balances have been paid in full and on time. Keep in mind that closing joint accounts could ding your credit score, especially if you close multiple accounts within a short period of time.
You could also ask if your creditors will separate the debt and reestablish your joint accounts in your name only, thereby converting joint accounts into individual ones. This will then transfer the loan or balance over to your new credit line. A creditor may require that you reapply for credit as an individual before deciding whether or not to extend you credit.
If you are trying to untangle a mortgage or home equity loan, a lender will typically require that you refinance in order to remove your spouse from the contract.
Your ex-spouse’s individual credit accounts will not affect your credit score
The credit reporting agencies keep files only on individual U.S. residents, not spouses or families. This means that you and your ex-spouse each have your own credit file.
While all credit accounts held jointly by you and your ex-spouse will appear on both of your credit reports, the same is not the case for individual credit accounts. Your individual credit accounts will only appear on your credit report, while accounts belonging to your spouse will only appear on your spouse’s credit report.
In some states, all debt from a marriage is considered a joint debt
If you live in one of the nine community property states—Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin—all debts that pile up during marriage are considered joint debts. That means the debts on individual accounts in your spouse’s name may appear on your credit report, and vice versa, despite not being joint accounts.
Monitor your credit report after your divorce is final
As you work through your divorce and establish your finances in the aftermath, regularly monitor your credit report so you know where you stand. If your credit report contains negative information because of your ex-spouse’s payment history, consider adding a consumer statement to your credit report for free.
In your statement, you can describe your situation and explain the circumstances that led to the negative information. Your consumer statement will become part of your credit file, and some creditors may consider your statement when evaluating you for credit. Keep in mind, too, that creditors can’t deny an application for credit because of your marital status.
If you change your name, address, or any other personal information as a result of your divorce, contact your creditors so they can update your information in their files. This will help ensure that your correct information is reported to the credit reporting agencies. To confirm your identity and personal information, you may be required to provide court documents for a legal name change, a state or military ID reflecting your new name or address, a copy of your Social Security card reflecting your name change, or a valid driver’s license.
Rebuilding your credit and finances after a divorce takes time, but it’s not impossible. By regularly monitoring your credit report, you can address problems as they arise, rather than waiting for them to negatively impact your financial life.
Diane Moogalian is vice president of operations for Equifax Personal Solutions with responsibility for operational strategy and execution in support of customer care and fulfillment of credit and identity-related products for consumers. Prior to joining Equifax in 2007, Diane held several strategic roles with leading financial services companies. Diane graduated from the University of Richmond with a bachelor of science degree in business administration (marketing and economics) and earned a certificate in international business from Virginia Commonwealth University.
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