You have no idea how much damage can be done to your credit between now and the finalization of your divorce. Whether it was an amicable split or even if the cracks have only just begun to appear, your credit score and history are potentially at risk. However, it is never too soon to consider financial planning at the earliest hint of divorce.
As with all divorce matters it is strongly recommended to speak to an attorney before separating any accounts or changing anything with credit cards!
Should you start planning immediately after telling your spouse you want a divorce? Experts actually recommend you begin even sooner. As soon as you decide that your marriage is over, at least assess your options. Then, reach out for help. Without a doubt, you may be entering one of the most emotionally difficult periods of your life but do not let it get the better of you. Answers may not come quick or easy. Think of it this way. However long it took for your finances to become intertwined with that of your spouse, it should take at least as much time and thought to begin the unraveling process.
Separate Those Accounts
Once you have sought help reviewing your credit, the first and most critical step is to begin separating any jointly held accounts. Here is a helpful list of examples it will help to review
- Credit card with authorized user – Authorized users may use the credit card but only the primary account owner is held liable for the debt. If that’s you, get sole authority over the account. If you’re the authorized user, remove yourself because if that debt is never repaid, it can still affect your credit score. Before you do anything, however, talk to your lawyer. Removing a spouse who still relies on the card for buying groceries and paying bills might have legal ramifications.
- Joint credit cards - Close all joint accounts as soon as possible, as long as you have other sources of credit. If you and your ex are on good terms, it is in both of your best interest. Obtain new individual credit cards. Work together to pay off the debt on the joint account. Close it. Be sure to follow that sequence of events because qualifying for a new card might be difficult once you close the joint account. Even if a judge had to order your spouse to pay, remember that your credit score is affected either way. Judges have no influence on credit reporting agencies.
- Removing a name - There are scenarios where simply removing a name without closing the account might be necessary. Closing an account that demonstrates years of dependable and responsible debt payment is not what new creditors want to see. On the other hand, your ex may not yet have the income to qualify for new credit. The debt will still need to be paid in full but you might consider removing your name and giving your ex the card and the associated history. It may not always work out that way, but it helps to be on good terms.
- Mortgages – Home loans are complicated on a whole other level. It is ill advised to resolve them without assistance. There are questions that must be asked. Are you the primary wage earner? If so, are you giving the home to your spouse or buying out their interest? Are you assuming liability or is your ex? Is your name on the mortgage? Are you eligible to refinance? Liability for a house puts your credit score and credit history at risk.
Worst Case Scenario
If things get ugly, protect your credit score and history by employing a security freeze, which prevents credit reporting agencies from releasing your credit report without your permission. Your spouse will not be able to open any new credit accounts in your name. Notify each of the three major credit reporting agencies – Experian, TransUnion and Equifax – individually. When applying for new credit, be sure to provide the reporting agency with identification verification, the PIN or password they gave you and a statement lifting the freeze or naming the person you want to receive the credit report.
With one’s financial future at stake, divorce tends to reach a new level of urgency. As a divorce attorney, I can attest that financial matters are a common issue. If you have any questions, please contact my office for an appointment.
Fabrikant Law, LLC prides itself on providing exceptional professional and personalized service. For assistance with your family law matter, please contact us today.