Contemplating Divorce? Here are 3 tips to protect your credit, right now.
The financial fallout of a divorce can be catastrophic and it can take years to recover. There are steps you can take right now to mitigate the impact of divorce on your credit.
- Pull your credit report from the three reporting agencies, right now. Most people are complete unaware that they are entitled to pull their credit reports from each of the three reporting agencies, for free, one time per year. For Massachusetts residents, Mass.gov/ago is a great starting point to accessing your credit report. There is no better way of educating yourself as to your current lines of credit, any reported late payments, or, even worse, any accounts currently in collection that you may not have authorized. Unfortunately, victims of credit or identity fraud find this out, far too late. Oftentimes in divorce, one of the biggest struggles is dealing with the practical truth that you cannot run two households on the same income and at the same level you ran one. As a result, difficult decisions are made in terms of what to pay and what not to pay – knowing what your current debt is makes this decision far easier to make.
- Accordingly, pay off as much unsecured individual debt as you can. Again, you are contemplating running two households on the income of one. As a result, disposable income is likely a thing of the past. Prioritize paying off individual (vs. marital) credit card debt, even above savings. Speak to an Attorney to understand the difference between marital and individual debt; then pay off the individual debt as quickly as possible.
- Open an individual bank account. Oftentimes in divorce, people panic about the financial fallout from divorce and spending savings without thinking about the long term implications. Creditors are not going to give you a hiatus on paying your ongoing monthly payments (such as a mortgage, car payment(s), and/or credit card payment(s)) simply because you are going through a divorce; consequently, during a divorce, any available savings will allow you to continue paying these expenses on a timely basis, thereby preserving your credit.
