Minimizing the impact of divorce on your credit score

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While getting divorced doesn’t automatically lower your credit score, things that have happened as a result of your marriage and/or divorce certainly could have an impact.

For example, you might now be saddled with debt that you previously faced with your spouse, making it hard to stay current on your bills. Perhaps you authorized your spouse to use your credit card and he ran up charges that you’re now on the hook for, or maybe you’ve been using credit for things that you used to pay for with cash because of the costs of moving out and finding a new place. Maybe you even got so caught up in the emotional trauma of your divorce that you started missing payments. Now you’re facing mounting balances that are even harder to pay, which may be reflected in your score.

Clearly this is not a desirable situation, but there are things you can do to try and minimize the hit.

First, make sure you know what’s in your credit report. That way you’ll know which debts are affecting your score, which debts you and your soon-to-be ex are both responsible for and which cards you should consider cancelling. Simply agreeing that you’ll pay Card A while your spouse covers Card B isn’t good enough. As far as the bank is concerned, if it’s a joint account, they can come after you if your spouse isn’t making the payments.

Also, if you’re separating, you might consider “freezing” your credit in order to restrict potential new lenders’ access to your credit report. This way a ex-spouse won’t be able to open up new cards or lines of credit and run up debt in your name because the lender would be blocked from running a credit check. You can lift the freeze at any time, but it’s probably a good idea to wait until the divorce is final.

Additionally, be sure to get together all your important financial documentation before seeking a divorce. Once you’ve announced your intentions, your spouse may be less cooperative in providing copies of everything you need, such as joint income tax returns for the years leading up to the divorce, credit card and bank statements and documents laying out your retirement accounts, investments and insurance policies. Knowing exactly what you have will make it easier for your attorney to help position you financially following the divorce.

Meanwhile, you should talk to a financial adviser to obtain realistic advice on how your divorce will impact your finances and credit. Your attorney may be able to help you find one. This person may be able to help you make difficult decisions, such as whether to cancel credit cards and reopen new ones in your own name and how to choose which ones to close and which ones to keep open.

Finally, consider cutting back on expenses in anticipation of the reduced income that you may experience as a result of the divorce. For example, rather than keeping the family home, it might make more sense to sell it, share the proceeds with your ex and move into a more affordable place. These are obviously difficult, emotionally laden decisions to make, but a good family law attorney can talk through them with you.

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