How to Manage Your Credit During a Divorce

Does Divorce Affect Your Credit Score?

A divorce has no direct impact on your credit report or score. Your marital status doesn't appear anywhere on your credit report and it doesn't factor into your credit score calculations.

However, a divorce can have a serious indirect effect on your credit. If either you or your ex mismanage joint credit accounts, or the stress of getting a divorce causes you to accidentally miss payment deadlines, your credit can certainly take a hit.

Closing joint accounts, removing yourself as an authorized user on your ex's account(s), and applying for new credit cards or loans can also affect your credit report and score, by changing your credit utilization, length of credit history and recent inquiries.

How Do I Separate My Credit After Divorce?

Credit files aren't combined with your partner's during marriage in the first place, so you don't have to separate your credit reports or scores in a divorce. You can, however, separate yourself or your partner from any joint or cosigned accounts you have in both your names.

Even if your debts (and the responsibility for paying them) are assigned as part of your divorce decree, creditors can still hold you liable for the debt as long as you are associated with the account. Negative items such as late payments and maxed-out credit cards can be reported to credit bureaus. If your ex agrees to make payments on a joint account and then doesn't, those late or missed payments can show up on your credit report as well as theirs. If they default, you are jointly responsible for the debt despite what your divorce decree states.

To minimize this risk, take steps to disentangle joint and cosigned accounts.

Joint Credit Cards

To the extent you can, pay off and close joint credit card accounts. You generally can't remove your name (or your ex's) from a joint account, but you can close the account as long as you have a zero balance and both agree that you want to do so. If you're carrying a balance, consider splitting it by transferring it to cards each of you control. Alternatively, ask the credit card issuer if you can convert the joint account into an individual account in your name. Don't forget to redeem rewards (and share them, if appropriate) before you close your account.

Authorized Card Users

If you are an authorized user on your ex-spouse's credit card account, call the card company and ask to have your name removed. As an authorized user, you are not responsible for paying the credit card bill, but some account information (including credit utilization) may appear on your credit report. If your ex is an authorized user on your account, ask to have them removed as well.

Mortgage

Your lender may not allow you to remove either party from a joint mortgage. You may need to refinance or sell your home, unless you qualify for the mortgage on your own or your former spouse is willing to keep their name on the mortgage to help you stay in the home. Doing so will affect their ability to borrow money, since the debt will continue to be listed on their credit report, along with any late payments or delinquencies.

Cosigned Loans and Credit

If you cosigned a loan for your ex, you are responsible for paying the loan if they default. Although you can contact the lender and ask to have your name removed from the loan, many lenders won't. Your ex may have to refinance their loan without you as a cosigner.

How to Protect Your Credit Score During Divorce

1. Review Your Credit Report

Now is a good time to get copies of your credit reports from all three credit reporting agencies. You can do this for free every week at AnnualCreditReport.com. Your credit reports will give you a readout on your open accounts, balances, payment history and issues such as accounts in collections or bankruptcies. It can serve as your blueprint for finding joint accounts you need to close, hidden balances you didn't know existed and any problems that may have bubbled up.

2. Make the Split

Divide responsibility for your joint bank accounts, credit cards and loans as fairly and amicably as you can. Bring in a mediator or your lawyers if necessary, and do your best to make an arrangement you both can live by.

The challenges here are many. If either party is vindictive, they may run up charges or fail to make payments as revenge. Even when people are trying to be conscientious, accidental charges or late payments can occur. Create a clear division of accounts and honor your agreements meticulously. Then take steps to close down joint finances so you can both move on.

3. Change Your Account Numbers

In addition to closing credit cards and paying off loans where possible, consider changing account numbers on your remaining accounts. You and your ex may have each other's payment information stored on computers and phones, with online retailers, attached to subscriptions and so on. Not only can these payment credentials be used maliciously; it's also easy to make a mistake.

Changing account numbers on payment cards is a hassle—you'll have to re-enter payment information on all your sites—but it can help to keep you out of each other's credit going forward.

4. Freeze Your Credit

Putting a lock on your credit information helps avoid the possibility of other people opening accounts using your identity. Although this step is optional, you have the right to freeze your credit—and this can be a good idea even when you aren't going through a divorce as an added protection against identity theft.

Whenever you need to apply for a loan or credit, you can unfreeze (and refreeze) your information as needed.

5. Follow Up

Check your credit reports regularly to make sure the account changes you've made are being reflected—and that you've remembered to make all the changes you intended (divorce is a busy time). You can also check your credit score and report anytime for free with Experian.

How to Build Credit After a Divorce

Establishing or rebuilding credit can be a key challenge after divorce, especially if your credit, income and assets were tied to your spouse. Here are three key steps to building credit when you're recovering from a big event like divorce.

• Start small and build. Improving your credit score takes time. You may have to start with a small credit limit or a secured credit card. Use your card for a few regular purchases, pay the balance off each month and always pay your bills on time. After six months, you may be approved for an unsecured card, or your card issuer might convert your account and refund your security deposit. If not, keep managing your card responsibly and try again in another six months.
• Maintain a positive payment history. Your payment history is the single biggest factor in determining your credit score; it accounts for 35% of your FICO^® Score^☉ , the score used by 90% of top lenders. Even one late payment can set you back, so pay every bill on time.
• Get help if you need it. The nonprofit National Foundation for Credit Counseling (NFCC) can connect you with a credit counselor who can help you establish a budget and repay creditors. Or look for other nonprofit organizations that provide low- or no-cost financial management training or financial assistance. Just be wary of for-profit companies that charge a substantial fee in exchange for a "quick fix" to your credit problems.

Frequently Asked Questions

• Can I Remove My Ex From My Mortgage Without Refinancing?

  If you qualified for the loan together, your lender probably won't be willing to simply remove one party from the loan. Instead, you may have to refinance, sell your home or pay off the loan in order to make a clean break.

  If both you and your ex are named on your mortgage, credit bureaus cannot remove the account from your credit report. You are still liable for the loan, even if your divorce decree assigns responsibility for payment to your ex.

  Holding a mortgage with your former spouse isn't ideal. The loan will continue to show up on your credit report as well as theirs, possibly restricting either party's ability to get a new home loan in the future. If your ex makes late payments or—worse—defaults, your credit will take a hit as well.

• Should I Cancel Credit Cards During a Divorce?

  Canceling joint credit cards is a good idea when you get divorced. Though the standard advice (when you're not divorcing) is to keep credit card accounts open to maintain credit limits and account longevity, having joint accounts when you're not joined in matrimony can be messy.

  Both parties must agree to close an account. If possible, make this determination part of your separation and divorce agreements. You'll be able to divide up responsibility for accounts and outstanding debts fairly and clearly establish who pays for what.

• Can I Open a Credit Card During a Divorce?

  You can open a credit card during a divorce, and in some cases, it's a good idea. A balance transfer card allows you to transfer a joint account balance so you can close the account. Having a new card in your own name can also replace the available credit from a closed account. New credit can help keep your credit utilization low and give you a bit of spending flexibility when needed.

  Just don't apply for several credit cards at once. Doing so can damage your credit and make you appear risky to lenders. Instead, see which cards you may qualify for and choose the one that's the best fit for your needs. Experian can match you with credit cards based on your credit profile.

The Bottom Line

Divorce is a financially tumultuous time. But if you take steps to sort out your accounts, protect your credit and work to rebuild, you can keep your possibilities open while minimizing risk and damage. During this time, free credit monitoring from Experian may help. Free credit monitoring alerts you whenever there's a change to your credit file, so you can stay on top of credit activity in the background while you're doing the hard work of building a new life.