Five Steps to Best Protect Your Credit Score When Going Through a Divorce
Divorce is a crucial time to protect your credit score. Your financial situation could change dramatically, and those changes can make your credit score vulnerable. Here are 5 steps you can take to protect your credit score during a divorce:
1) Run your credit report.
For every aspect of divorce, the best approach is to face the challenge head-on. That means being fully aware of the facts, even if they are unpleasant. Protecting your credit score is no different—you are going to want all the information that is available to you. The best place to start is by running your credit report. This will not only tell you what your credit score is, but it can tell you what accounts exist, when the account was opened, the payment and balance history, and the balance owed.
2) Open your own bank account and credit card.
Separating yourself financially as quickly as possible is one of the best ways to protect yourself during divorce. From the date you or your spouse is served with a Petition for Dissolution (divorce papers), any debt that you or your spouse incur is that person’s sole responsibility. Any income you earn after service is conducted is also your sole and separate property. To protect your credit score, inform your spouse that they are not to incur any further charges on any credit cards you are the primary account holder of and that you will be removing them from your cards. If you are a secondary account holder on your spouse’s credit card, request they remove you from that card. You can also open your own bank account and begin depositing your paychecks into that account.
3) Set a budget.
The transition from living with your partner to living alone can be difficult. Your lifestyle, needs, and monthly expenses will change, and you will be 100% responsible for your bills. Create a list of your debts and monthly expenses and determine if your income will cover those expenses. Review the list and decide if spending habits need to change. Set aside money for unexpected expenses. Be financially cautious until you can figure out your new lifestyle costs. Set a budget and stick to it.
4) Pay your bills on time.
Delinquent payments will lower your credit score. Your spouse may have managed your monthly bills, or you may have split who paid what and suddenly, you are responsible for all of them. Know what bills you have and figure out how to pay them. Setup automatic payments through your online banking. Make sure you have access to your online accounts. Set up paperless (email) billing. Update your account profiles and change your address.
5) Protect yourself from your spouse’s debts.
Through a divorce, your debts will be divided between you and your spouse; however, you may still be liable for the debts awarded to your spouse. The Court cannot change the existing amount owed to the third-party lender and you may have signed a contract making you joint and severally liable. If a debt is unpaid, a creditor will seek payment from whomever they can. This may require you to consider how you want to divide the debts either by you (1) taking on more of the debt in exchange for more of the assets or (2) requiring your spouse to refinance the debts by a certain date. Do not remain on the title, account, or insurance of any asset that now belongs to your spouse.