How Divorce Can Impact Your Credit Scores

Dear BEL,

Divorce proceedings don't affect your credit report or credit scores directly. Rather, you may see an indirect effect because the divorce process often involves splitting up joint accounts, which can very much affect your credit history and credit scores.

Does a Divorce Lower Your Credit Score?

Your credit report doesn't state whether you are married, single or divorced, so changing your marital status has no impact on your credit. However, how you handle any joint accounts with your former spouse can have an effect on both your credit report and theirs.

Joint Accounts Will Still Appear on Your Credit Report

Accounts are reported for each person associated with it, so if you are listed as a joint owner, cosigner or authorized user, you must deal with that account prior to the divorce. That means closing the account completely or otherwise ensuring your name or your ex-partner's is totally removed from the account. As long as the account remains open with both of your names on it, you are both legally responsible for it, regardless of what other agreements may say.

Does a Divorce Decree Void a Contract With a Lender?

Your divorce decree has limited power when it comes to your agreements with lenders and creditors. A divorce decree may specify who is responsible for accounts opened during the marriage, but it doesn't break contracts with lenders. A divorce decree is only an agreement between the divorcing couple and the court specifying who will pay each debt.

If the spouse responsible under the divorce decree is unable or unwilling to pay and the contract has not been changed by the lender, the late payments still will appear on both credit reports and will have a negative impact on credit scores for both individuals.

The missed payments can occur years after the divorce and still will be reported for both people associated with the account. That certainly can be an unpleasant surprise if you haven't dealt with the account appropriately.

In some cases, vindictive behavior during the divorce by one spouse or the other can have a very direct, very negative impact.

Sadly, an angry spouse may try to hurt their soon-to-be former wife or husband by making large credit purchases on joint accounts with the intent of punishing the other person with huge debts or wrecking their credit history.

What they usually do not understand is that by doing so, they also likely will drag down their own credit history at the same time.

How Do I Protect My Credit During a Divorce?

Going through a divorce means you are beginning a new chapter on your own, so having a strong credit history is as important as ever. Here are some ways to help protect your credit during a divorce:

• If at all possible, maintain a civil relationship during the divorce process to avoid the pitfalls of a vindictive split. Working together to pay off and close existing joint accounts is the best possible approach.
• If paying off and closing an account is not possible, try to convert the account to an individual account. Contact each creditor and explore the options available with that lender.
• Even if you think an account is in your name only, double check with the lender to make sure your spouse is not listed as an authorized user. If they are, make sure to have their name removed.

The most important thing is to make sure that payments are made on time for any joint account as long as your name is on it. Doing so will help you make a clean separation without financial burdens that could haunt you even after the divorce is final.

Checking Your Credit Reports Often Is Key

You are smart to want to protect your credit, especially when going through major life changes. One key to protecting your credit is to monitor your credit reports frequently. You are entitled to a free report from each of the three credit reporting companies once every 12 months through AnnualCreditReport.com. You can also check your Experian credit report and credit score for free any time. Doing so will help you keep your credit in good shape and ensure that there are no surprises as you enter a new stage in your life.

Thanks for asking.
Jennifer White, Consumer Education Specialist