How to Not Have Your Credit Ruined if You Get a Divorce

Divorce is never pretty and it is rarely pleasant. To make it worse, divorce has a terrible way of destroying credit. Luckily, there are a few things you can do to prevent this from happening.

Mistaken Beliefs

Many divorcing couples make agreements in their divorce decrees that state who is responsible for which bills. After signing the agreement, they assume they are off the hook. Theyre wrong. In fact, creditors dont much care what was decided in a divorce settlement. All that matters to them is the agreement you made before the divorce, which was that you were responsible for paying back the money you borrowed. As a result, many individuals have found their credit destroyed when the person they divorced failed to make the payments they agreed to pay.

Dont Wait Until it is Too Late

In addition to assuming their responsibility is over after signing a divorce agreement, many people fail to follow up with the creditors to make sure the debts are being paid. As a result, the first time they learn about it is when the bills are so far in arrears it is impossible to get them caught up. By this time, the unsuspecting divorcee has terrible credit and no means of escaping the debt. Lenders are not obligated to call you when the account begins falling behind, and most of them dont. Therefore, you need to actively keep tabs on the debt until it is paid in full.

Identify Accounts

When going through your divorce, there are also steps you can take to protect yourself. First, identify every account your spouse has access to as either a joint account holder or as an authorized user. An account with your spouse as an authorized user can be particularly problematic because he or she is free to spend on the account, but is under no obligation to repay the debt. The quickest way to identify accounts is to obtain your credit report from all three of the major credit bureaus: Equifax, Experian, and Trans Union.

After obtaining your reports, you should:

  • Create a list of all open accounts.
  • Obtain the account number for each open account.
  • Get the contact information for each creditor.
  • Call the creditors and determine whether your spouse is also listed on the report.

If your spouse is on the account, you have four choices. You can close the account, freeze the account, remove your spouses name as an authorized user, or leave the account as it is. You should seriously consider closing your joint accounts. If there is a balance owed on the account, however, you probably wont be allowed to close it. In this case, it is best to freeze the account. When an account is frozen, no one can use the card any longer.

Whatever decision you make, be sure to make it clear to the creditor that you are no longer responsible for any charges posted to the account. Then, keep a record of the date, time, and contact persons name in case problems arise later. You should also follow this up with a letter recapping what you discussed on the phone. Be sure to check on your credit report in a few months to make sure the accounts have been properly handled.

If the divorce is amicable, the balance from the credit card you share jointly can be transferred to responsible spouses personal account. This way, you dont have to worry about it coming back to bite you down the road.