How To Prevent Your Divorce From Ruining Your Credit
Going through a divorce can be a major transition both personally and financially. Although the act of getting a divorce doesn’t directly affect your credit score, it can change your financial obligations and in turn, can affect your credit. In today’s “Financially Savvy Female” column, we’re chatting with Rachael Burns, CFP, financial planner and founder of True Worth Financial Planning, about how women can ensure their divorce does not ruin their credit.
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Keep Up-To-Date With Your Payments
“Divorce is a chaotic time, and it’s easy to forget to pay your credit card bill,” Burns said. “Misunderstandings are also common when one spouse assumes the other is taking care of the bill.”
It’s important to be aware of any joint debt you have with your ex-partner because you are equally liable for paying it off.
“Make sure that you run a credit report to identify all joint debt in which you are a co-owner, and double-check that payments are being made,” Burns said.
Don’t Ignore Joint Debt
Going along with that, it’s important to realize that joint debt doesn’t go away with the divorce, so you can’t just ignore it.
“You’re still on the hook for joint debt, even after your divorce is finalized,” Burns said. “Many people assume that once the divorce is finalized, they are automatically de-linked from any joint debt that has been allocated to their ex in the divorce decree. However, you must update the ownership with each individual financial institution, or else you may still be held responsible for the debt.”
Actively Work on Building Your Credit If You’re Starting From Scratch
“If you haven’t established your own credit, you may see a hit to your credit score when your ex drops off your accounts,” Burns said. “This can happen whether your ex was a joint owner or authorized person, because their credit history was contributing to your own. This doesn’t mean you should keep them on your accounts, but it’s something to be aware of. Make sure you check your own credit and look for opportunities to build it up after a divorce.”
Some ways to build up your credit include opening up a credit card, taking out a car loan and staying up-to-date with payments.
GOBankingRates wants to empower women to take control of their finances. According to the latest stats, women hold $72 billion in private wealth — but fewer women than men consider themselves to be in “good” or “excellent” financial shape. Women are less likely to be investing and are more likely to have debt, and women are still being paid less than men overall. Our “Financially Savvy Female” column will explore the reasons behind these inequities and provide solutions to change them. We believe financial equality begins with financial literacy, so we’re providing tools and tips for women, by women to take control of their money and help them live a richer life.
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