Divorce can be a difficult time for both parties involved, and many times the last thing partners worry about is their credit. But in many cases credit should be the first thing they worry about.
When both parties are stressed about a divorce, it can be easy to let financial obligations fall by the wayside. In a particularly contentious divorce, stress can run high and some, if they feel they have been scorned, may intentionally harm the other’s credit. Divorce presents a unique situation for your credit score since until the divorce is final, your spouse may still have control over your credit, no matter how friendly or unfriendly they are. But there are some important things you can do to help protect yourself during divorce.
The most important step you can take to protect yourself from a vengeful ex is to remove them from the list of authorized users of your accounts. An authorized user is not under any obligation to pay expenses incurred from the use of the account, but is allowed access to make charges on the account. Finding out that your spouse has racked up a mountain of debt in your name can be devastating when you are already trying to work out your financial life as a single instead of a couple. Most companies make it easy for you to remove your spouse from the account. Usually all that is required is for you to call the company and ask that the spouse be removed. Some companies may ask you to jump through a few extra hoops, such as speaking with someone in person or filling out a form, but the time it takes to take care of these inconveniences is nothing compared to the time it takes to repair damaged credit.
You should also have yourself removed as an authorized user from your spouse’s accounts. At least two out of the three major credit reporting bureaus use authorized user accounts as a factor in determining your creditworthiness. In either case you should be able to remove yourself and your spouse from any accounts without needing their permission. In the worst case scenario you may have to dispute the use of your name with a credit reporting bureau, which is still a small price to pay for the reward of continued good credit during a time when your financial stability may already be on shaky ground.
It’s also important to ensure that you have your spouse removed from any joint accounts. This can be a little trickier than simply having an authorized user removed, because in a joint account both parties are considered equally responsible for the account. Some people think that as soon as the divorce paperwork is signed joint accounts are no longer joint. But it’s not true; signing up for a joint account with someone has nothing to do with your legal relationship to them. Many companies will allow you to have a joint account with a complete stranger as long as you are both willing and able to sign the paperwork.
Usually companies allow a couple to separate their joint accounts if they both agree to it. If you can’t split the account, they may instead allow you to drop one name from the account. In this scenario you can divide the accounts evenly. If one spouse keeps the car then make sure theirs is the only name on the auto loan. When dealing with a particularly difficult company with complicated procedures, the most viable option may be to decide with your ex who will be responsible for which debt, and make an agreement to pay it. This is the riskiest option and should only be done if there is no other way to appropriately split your debt.
If you must use this option, be sure to include these arrangements as a part of your divorce agreement. Cover all of your joint debt and make sure every last penny is accounted for. Also include in the agreement what you will do if one of you misses a payment. It is important to agree that you will each receive notification before the missed payment, so that the other partner may cover the payment in order to avoid credit damage. If you do keep any joint accounts, be sure to contact your lenders and have regular statements on these accounts sent to you. This way you can safeguard against potential problems before they get out of hand.
If you’ve already been hurt by an ex who has harmed your credit score, try to re-establish your credit as soon as possible. The first step is to continue working hard to remove your spouse from any current joint accounts, or talk to credit agencies to make sure your ex’s bad credit habits will not affect your credit score.
The second step is to make sure you continue to make regular payments on any accounts, especially those with higher interest rates and larger amounts of debt. For more information on which accounts should be paid off first see our articles “Re-Establish Your Credit” and “Credit 101.”
Your third step is to do your research and find local companies that want to give credit to those who need it, in spite of a low credit score. Scott McCorkle’s Credit Capitol, located in Charlotte, N.C., is interested in one thing and one thing only: making sure you get the auto loan you deserve. For more information, feel free to contact us at 866-442-0871.
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