Does Divorce Hurt Your Credit Score?
Your marital status and divorce do not have a direct effect on your credit score. However, the choices you make during your divorce can have a negative effect on your credit. There are multiple factors that influence your credit score: the length of your credit, the number of hard inquiries made into your account, the number of missed payments you have in the last seven years, the number of lines of credit you have, and your rate of revolving utilization.
Because of your divorce, you can experience a change in income that can affect whether you make payments on time. Missed payments also occur after a divorce as divorced individuals adapt to having to cover certain debts alone. If you use credit cards or loans to cover divorce-related expenses (i.e. court fees, lawyer fees, payments for experts, etc.), your credit can also suffer if your revolving utilization drastically increases.
How to Manage Debt During a Divorce
As we mentioned, getting divorced doesn’t inherently affect your credit. However, the decisions you make during your divorce can impact your credit score. To ensure your credit survives the divorce, you should take steps to manage your debt, such as:
- Creating a financial plan. In addition to discussing what expenses you should plan for with your attorney, you should also take a look at what separate and joint debt you have with your spouse. Until your divorce is finalized, you should discuss who will cover the payments for your debts while the divorce is pending. Having a financial plan can also help you better plan understand whether you can take on certain debts alone after divorce. For instance, by reviewing your mortgage and credit card payments, you can get a better idea of whether you can afford certain assets.
- Being responsible. While your marital status does not affect your credit score, on-time payments, revolving utilization, and other factors can affect your score. During your divorce, you should continue to have (or build) healthy credit practices and be responsible.
Rebuilding Credit Independently
If your credit has suffered because of divorce-related financial decisions, you can rebuild your credit. While rebuilding credit doesn’t happen overnight, you can maintain a positive payment history and take small steps to improve your score. In many cases, you can notice an improvement within six months.
It is important to note that joint while divided in a divorce settlement can still be seen as joint accounts by credit bureaus. To be more specific, your divorce settlement does not negate loan agreements. Thus, if you and your ex are included on the mortgage, both parties will be liable for the loan even if the divorce decree gave one party responsible for the debt.
Missed payments by the other party can affect your credit, and it is not in your best interest to continue holding a mortgage or shared debt with your ex-partner. You should consult with the creditor to discuss removing the non-liable party. In many cases, you may have to sell or refinance, since the lender approved the loan for you together.
Have Questions About the Financial Impact of Divorce? Contact Us!
Divorce can affect many different aspects of your finances, including your credit score. Fenchel Family Law PC is here and equipped to help our clients handle the legalities of divorce as we take a holistic approach to our cases. Our attorneys understand the impact certain legal decisions can have on your financial health and future, and if you are considering or are involved in a divorce case, we are here to empower you to make informed case decisions.
Call (415) 650-1112 to schedule an initial consultation or reach out to us online today.