Not only does divorce take an emotional toll, but it can also be a great financial burden if the process is mishandled. While divorce proceedings alone do not impact your credit, the financial fallout from the process can greatly impact your credit score and hinder your financial future.
Here are 10 common ways that divorce can impact your credit.
- Refinancing Your Home. In order to move a shared property to one spouse’s name, you may have to refinance your mortgage to complete the process. This refinance will require credit inquiries and potentially add new debt for one spouse.
- Uneven Distribution of Debt. When two spouses divide assets, one may take more of the income/assets/property but also more of the debt.
- Change in Household Income. Many divorcees report that losing the additional income provided by their spouse made the largest impact on them financially post-divorce. Going from two incomes to one may greatly affect the way you have to budget bills and payments. It is advisable to fully examine your finances early on to avoid issues down the road.
- All Debt Is Not Properly Disclosed During the Divorce. During the divorce process, both spouses are required to disclose all financial accounts. Unfortunately, not everyone is fully upfront about their assets. Running a credit report on yourself is the best way to check accounts bearing your name.
- One Spouse Doesn’t Stay Current with Payments. Most courts will work with both spouses to discuss and agree upon payment plans for shared assets and shared property.
- Your Spouse Still Has Access to Your Accounts. If divorcing couples do not split their joint accounts, both parties will still be responsible for all additional charges and purchases. It is best to split joint accounts as soon as possible.
- Your Credit Limit Decreases. Creditors will regularly check in to see if you have had any changes in income. If your spouse was making more than you and your accounts have been separated, then the credit company may decrease your spending limit, depending on the terms of your credit card agreement. This change can affect your credit score as well as the rate at which you reach your card’s limit.
- The Divorce Proceedings Turn Ugly. Remaining civil through the divorce process can help to mitigate the risk of your spouse doing financial harm to you.
- Confusion Over Divorce Decree. People are often confused as to what their exact financial responsibilities are as stated in the divorce decree. Consulting with a family law attorney throughout the process can help protect your financial future.
- Spouses Refuse to Work Together. Sometimes bills, especially the smaller ones like the water bill, can go overlooked and remain unpaid. Communicating about shared financial responsibility after the households are separated can help to ensure that all the bills are paid off and everyone’s credit remains in good standing.
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Partner at John F. Schutz, P.L.
Representing clients exclusively in family law cases for the past 24 years, Mr. Schutz is widely regarded as a marital and family law expert. He is Board Certified in marital and family law by The Florida Bar. As a Fellow of the American Academy of Matrimonial Lawyers (AAML), Mr. Schutz is committed to elevating the standards and improving the practice of family law.
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