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How can we help you

How, exactly, could divorce affect your credit score?

We all understand that divorce changes your financial picture even as it gives you a chance at a new trajectory. Unfortunately, some of the possible changes could affect your credit, which could make it more costly and difficult to get approved for loans, mortgages and credit cards. A serious hit against your credit could even make it harder to get a job or approved for housing.

What divorce-related issues could affect your credit — and what can you do to minimize the damage?

During the divorce, agree on who will pay what

Once you’ve decided to get a divorce, there is a time when both parties know the divorce is coming, or you’re working on the process, but nothing has been finalized yet. This is probably the period of time when it’s most likely for you to miss payments on your car, credit cards, utilities and mortgage.

This is because married couples typically share these expenses and, during the divorce process, it isn’t yet clear who will have the final responsibility for those bills. On joint accounts, you are both equally responsible for payment until the debts have been divided. If you can, come to agreement on who will pay what bills during the divorce process. If your ex isn’t cooperative, try to pay as many bills you can afford and keep detailed records of what was paid and when.

Set ground rules for new debt

Unfortunately, it’s all too common for one divorcing spouse to take advantage of shared accounts and run up bills for the other spouse to pay. Even though you should be able to get your ex to pay those bills in the end, in the meantime you could be facing thousands in new debt that you can’t afford. And, not paying it off could affect your credit.

As soon as you know you’re getting a divorce, start separating your joint accounts as soon as possible. Remove your ex as an authorized user on any credit accounts you can, and set ground rules on what new debts can be taken out during the divorce process.

Financing your divorce could lower your credit score

Most people don’t have thousands of dollars on hand to pay for a divorce, so you’ll have to borrow the money. Don’t use high-interest lenders like payday lenders if you can avoid it — their annual interest rates are sky high. Also, if you charge legal fees on your credit card, you will not only pay interest but could also increase your credit utilization, which can lower your score. Try hard to finance your divorce using lower-cost options like a bank loan or a loan from a friend or family member.