Will Divorce Ruin My Credit?
Divorce can affect many aspects of your life, but one thing you may not have considered is how it affects your credit. To begin with, what is credit? This is the ability of a customer to obtain goods or services before payment based on the trust that payment will be made in future. There are factors to consider when talking about credit and divorce. Divorce may or may not affect credit depending on a number of factors.
1. If you had any joint credit accounts with your ex-spouse
If you have any joint credit accounts or mortgages with your ex-spouse the outstanding credit will have to be settled. After being through with the court proceedings for the divorce, the judge may have ruled out that your ex-husband or wife has to pay a certain amount after the divorce.
It is important that you ensure that you are following up to ensure this is happening, especially if you find that your spouse is not as concerned as he or she should be, since this may affect you in future. The problem is that you will not have motivation to pay bills with assets that belong to you. The most unfortunate thing is that if these bills that are in your name do not get paid, then your credit will suffer.
So, if you know your name is on the account you should work hard to ensure they are paid despite the fact that probably your ex-spouse was the one who was supposed to make payment. It may occur that you and your ex-partner are in talking terms and may agree that you will both honor your financial deal till you are done, but if that’s not the case, you can pay the bills that your ex-partner is not paying regardless of who is responsible, just to avoid it ruining your credit.
After doing this, there are measures you can take to recover your money such as reporting non-payment to the court since your ex-spouse went against the divorce agreement.
2. If you are unable to pay your bills
Divorce can sometimes be chaotic or messy. A messy divorce may cause you to spend a lot of money on your lawyer making you unable to pay your debts. In other cases one partner might have been the breadwinner, which in most cases is the woman.
This may bring a lot of trouble since the dependent spouse will have trouble covering bills on his or her own. Being insolvent and the scenario of being left with no one to depend on may ruin credit since they may lead to delayed payments or over reliance of credit cards.
Payments should always be on time so as to avoid hurting or ruining your credit due to late payment If your current financial situation makes it impossible for you to pay your bills on time, your credit score may decrease.
If you are in such a situation and wonder what you can do, there are ways in which you can be able to get money to pay your bills. For one, you may find other means of getting employment, work over time, freelancing or hustling which will help increase your income or decreasing your expenses.
If you are used to living a lavish lifestyle, then you will have to minimize expenses on luxuries such as spending your weekend in a hotel or travelling to other countries, so as to clear bills. Other options may be moving in with your family or friends, selling your apartment or car in order to get stability.
3. If your ex-partner is still able to access your accounts.
There are cases in which couples will never be friends any more. They may split up causing a lot of drama however there are others who split up peacefully. Disappointment may cause one to do things that he or she has never done especially to the person who he or she once loved.
If your ex-partner is bitter and annoyed due to the divorce and has access to your accounts he or she may go and take a debt in your name. This is a common phenomenon especially with the partner who is legally allowed to access the account since he or she is not responsible for payment.
This can be frustrating since your partner may exploit and frustrate you and get away with it just because he or she is legally recognized. The bad thing is that this may happen if that is the only money you have left. You will have to repay the debt that was not taken by you.
Failure to pay the debt may ruin your credit score. The best thing to do after a divorce is to remove your ex-spouse from your credit accounts to make it is an individual account as much as you can as early as you can. It is said that prevention is better than cure.
People also say that divorce may cause distress and affect your mental health. You may tend to think that your ex-partner is good and reasonable and will take the divorce positively so there is no need to eliminate him from your credit accounts only to realize that he has a lot of anger in him so it is good to take precautions.
4. If you have to refinance your home
It may occur that you may decide not to sell the family home. In order to move the house or property into your name, you may have to refinance the mortgage where the first loan is written off. This can lower your credit score since it requires hard earnings – without support from your ex-partner, earnings may be a challenge.
On the other hand, if you do not refinance, you and your ex-partner will have to clear the mortgage repayments. If you are the person who moves out, you may have a hard time qualifying for a second mortgage to buy a new home.
5. Your credit limit is decreased after the divorce
Once your accounts are separated with your ex, your creditor may decide to lower your limit if he 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.
6. Sell whatever you owe
So, will divorce ruin your credit? Yes, if you have joint accounts, dependent on your spouse or your spouse name still exists in your credit accounts after divorce. If the above factors do not affect you then divorce cannot ruin your credit.
Apart from the strategies discussed above, below are other ways to protect your credit during divorce
1. Check your Credit account to see the shared accounts
You should carefully read each line of your credit report for any inconsistency, and to find out what accounts you’re partially or fully responsible for. You may be surprised to find that your ex- partner opened an account with your name which is not uncommon.
2. Change your security information
It is good to change the PIN on your debit and credit cards for security purposes. In addition to that it is also advisable to change password on the apps for your bank account not forgetting sites. You should also change the security questions so that your ex-partner cannot be able to answer.
It is also important to change or update your address in case you have moved out so that credit reports and bank statements are directly delivered to you. Information is power and at this time it is really nice to have secrecy especially when it comes to security codes and passwords.
3. You should add provisions to your settlement
After divorcing you should ensure that the lawyer includes conditions that cover you from potential credit damage in the settlement agreement. For instance, if you moved out and your spouse was left with the family home, you can add a provision declaring that the house must be refinanced within three years contrary to which it must be sold.
If your ex does not comply you may take him or her back to court. Another advantage is that your ex-partner has ample time to remove your name from the loan.
4. Adjust your lifestyle to match your income
After divorce, the lifestyle of divorcees change. Majority of them have financial constraints since they usually lose the other person’s income. The financial struggle after divorce is real. One therefore has to minimize on expenditure, for example, live in a cheaper house or sell and buy a less expensive car.
You should make a budget to be able to see what you can and cannot afford. Proper planning is required. You should prioritize the most important expenses and take care of the payments that have direct effect on your credit scores. The payments may include loans and mortgages.
5. Liquidate assets
You may opt to sell whatever you owe money on, with your lawyer’s input and approval, meaning you should have a court order. Before parting ways, you then split the profits so that each of you goes with their share.
Selling the property may not be a good idea especially when divorcing since it may affect children but it makes a clean getaway since you are sure there is nothing belonging to your ex-partner that you have.
You may even have to sell for less than you owe if your assets have lost value. You may get money to clear the loans after resale. You will only get a loss once and avoid future financial burdens and stress not forgetting that you will move on peacefully.
Here are things that you should not do during divorce
1. Do not incur additional debt
There are common financial mistakes that some people make. They incur an additional debt. A certain lawyer did his research and concluded that people take an extra debt assuming that the debt will be equally divided in the divorce, but, unfortunately, this is not the case.
The decision of taking an additional debt will leave you in a big financial trouble. The court often issues a financial restraining order which prevents parties from incurring additional debt and a violation of that order may result in certain debt being driven to one spouse leaving the other spouse. It is better to avoid a mistake in which you know the consequences than do it and regret later.
2. Talk carelessly
You should be extremely careful of on whatever you write via text or email especially concerning your spouse. Additionally, you should choose the verbal statements you make in front of witnesses regarding your partner or children.
As it is said, words do not die, and whatever you say or write may be used against you. In short, ensure you maintain amicable relations with your spouse and you should let the lawyer handle communications concerning your case particularly the ones which are pessimistic.
3. Do not make unrealistic demands
People who are going through divorce should not make unrealistic demands. There is no problem if you ask for a lot as long as it is reasonable. Some people or spouses may be nagging and even irritate the judge and his or her partner.
This may lead to prolonging of the process, which in turn increases the legal fees. In addition to that, it may lower your trustworthiness before the court. Despite the anger and pain, the one to determine credibility is you. You should therefore be very choosy in terms of the words you use.
Divorce Attorney Free Consultation
When you are ready to move forward with your divorce, please call Ascent Law for your free consultation at (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506