Going through a divorce is never a walk in the park. Aside from dealing with the emotional toll that comes with ending a relationship, disentangling joint finances can be extremely frustrating as well.
In the midst of all the chaos, you may be wondering what divorce means for your credit. Read on to learn more about how a divorce can potentially hurt (or help) your credit score and what you can do to protect it.
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Will getting a divorce hurt your credit score?
No, the act of divorce itself doesn’t hurt your credit score. This is because your marital status doesn’t show on your credit report, which means it can’t possibly affect your score.
However, your score can be affected indirectly. When you’re married, you’ll often acquire joint credit accounts with your spouse, and getting a divorce doesn’t automatically dissolve them. The way you handle those joint accounts can impact your credit score.
Why divorce hits women’s credit harder
Legally, sex and gender aren’t supposed to matter for credit scoring. The Equal Credit Opportunity Act (ECOA) forbids lenders from using credit scoring models that discriminate on the grounds of protected classes like race, color, religion, national origin, age, marital status, or sex. 1
Nevertheless, divorce may still be harder on women’s credit. One major reason for this is that, according to the Bureau of Labor Statistics, women earn less than men on average, so they’re more likely to face financial challenges post-divorce, which indirectly impacts their credit scores. 2
5 ways divorce can affect your credit
Here are a few things that can affect your credit during and after a divorce:
- Missing a payment on a joint debt: You may still have joint credit accounts after getting divorced, and any late payments that your ex-spouse makes will appear on your credit report, harming your score. We go into this in more depth further down in this article.
- Closing your joint credit card accounts: Closing a joint account may decrease your credit limit and increase your debt-to-credit ratio. It may also affect your credit mix if it’s the only revolving credit or installment loan account you have. These effects both have the potential to knock a few points off your credit score.
- Failing to pay alimony or child support: Failure to pay either will hurt your score. It will be especially harmful if your overdue payment is sent to a debt collection agency. 3 4 5
- Being financially sabotaged by your ex: Unfortunately, it’s possible for your ex-spouse to take vindictive measures, such as intentionally racking up joint credit card bills to put you in debt or drag down your credit score. Of course, doing so will damage their own credit score, too. Still, if you think this is a possibility, you should close your joint accounts and disentangle your finances as soon as possible to protect yourself.
- Being set back by the cost of divorce: According to a 2019 Martindale-Nolo survey, on average, the total cost of a divorce is $12,900, which includes attorney fees, court costs, and fees for tax advisors and real estate appraisers. Any child support or child custody payments may also be a financial burden for you. All of this can make it harder to meet your other financial obligations, which can impact your credit. 6
What will happen to my joint accounts when I get divorced?
As mentioned, your joint accounts with your ex-spouse will remain open after your divorce unless you actively close them.
This is true even if you have a “divorce decree,” which is a legally binding document containing agreements made between a divorcing couple and the court. The agreements include (but aren’t limited to) the division of marital assets and various financial obligations.
Your divorce decree has legal force, meaning that if it obligates your ex-spouse to pay off a debt, you can sue them if they fail to do so. However, if the credit account in question is still in both of your names, that doesn’t prevent the missed payment from appearing on your credit report and hurting your credit score.
What should I do about my joint accounts when I divorce?
When most people divorce, they want a clean break, financially speaking. There are two ways to achieve this:
- Close your joint accounts: Sometimes, you can simply close your joint accounts and reopen individual ones in your names, although this might be tricky if your ex-spouse isn’t on board with the plan (banks have varying policies about closing joint accounts when both owners aren’t present).
- Give up the rights to the accounts: If your ex-spouse won’t give their consent to closing your joint accounts, you can also get a form from your lender to give up your rights to them. This will get your name off the accounts, and you won’t be liable for any future debts that your spouse incurs.
Bear in mind that in either case, you may still be liable for the old debt that you incurred when you were a joint owner of the account. If you and your partner have a significant amount of jointly owned debt, you’ll need to come up with a plan for how to pay it off.
How to pay off different types of debt when you divorce
Here are a few strategies for how to pay off common types of jointly owned credit accounts:
- Credit cards: To keep things simple, just pay off your joint credit cards together, or transfer the balances to each of your individual credit cards before you divorce.
- Car loans: It’s a good idea to refinance a joint car loan in the name of the spouse who’ll be keeping the car. Alternatively, you could simply sell the car and split the profits.
- Mortgages: Joint mortgages can be trickier as they involve more money. If possible, refinance the mortgage into the name of the spouse who’ll be keeping the house. As with car loans, if neither of you is financially able to take on the mortgage alone, you can also sell the house and use the money to pay off the mortgage (and split what’s left).
How long will my joint accounts stay on my credit report if I close them?
How long a closed account will remain on your credit report depends on how well you’ve handled it. Your credit report will show your closed account for up to 10 years if your account history is positive (i.e., the account shows no late payments) and 7 years if the history is negative (i.e., it has late payments).
How to protect your credit during a divorce
Managing your credit during a divorce can be hard. Here are a few tips to help you prevent damage to your credit as you undergo a divorce:
- Maintain a civil relationship with your spouse: If possible, keeping your divorce civil can benefit both parties tremendously. If you can work out the financial details of your divorce peacefully, it can save you time, energy, and money.
- Know what exactly is on your credit report: Before doing things that will affect your credit (like closing joint accounts), you should check your credit report to make sure you understand your current financial standing. Bear in mind that you’re entitled to a free copy of your credit report every 12 months from the three main credit bureaus (Equifax, Experian, TransUnion), which you can get from AnnualCreditReport.com.
- Close or separate your joint credit accounts: Closing or separating your joint accounts will ensure that your credit score won’t be affected by anything your ex-spouse does.
- Remove your ex-spouse as an authorized user on your credit cards: If your former partner is an authorized user on your cards, they can use them just like their own credit accounts. To disentangle your finances, it’s best to remove them from the credit cards that are in your name.
How to protect yourself from a vindictive spouse
If the divorce was especially bitter, you might want to take further steps to protect yourself. Consider doing the following:
- Freeze your credit: Freezing your credit with all three main credit bureaus can prevent a vindictive ex-spouse from accessing your credit report or creating fraudulent accounts under your name. (This is illegal, of course, but it’s still worth protecting yourself.) Note that freezing your credit won’t keep them from using your existing accounts to commit fraud—if you’re concerned about that, tell your creditors about the situation and make sure you’re monitoring your account history closely.
- Change your passwords and update your information: Change the PINs and passwords on all of your credit cards, debit cards, and online bank accounts. If your information has changed (e.g., you have a new address, phone number, or last name), be sure to update it with your creditors. Doing so can prevent your ex-spouse from accessing your financial information.
Moving forward: How to manage your credit post-divorce
You might find yourself struggling with your finances after a divorce. That’s understandable— the divorce process can be pricey, and you may still be adjusting both emotionally and financially.
To help you build your credit and manage your finances after a divorce, here are three tips:
- Create a budget: As a single person, you might be living on less income than you were while you were married. Budgeting can help you avoid undertaking more debt or unmanageable repayments. Be sure to use your credit cards according to your budget.
- Review your credit report often: It’s important to monitor your credit activity closely so that you can make on-time payments and pay off any debts you have, thereby improving your credit score.
- Stay on top of your payments: It’s easy to forget to make payments when you’re dealing with a divorce. However, on-time payments are the most important factor for establishing a good credit score. You’ll also want to avoid accumulating interest fees from late payments, which will make your finances more difficult to manage.