Most adults have heard horror stories from people who claim that their divorce ruined their credit. While many of these stories are true, it doesn’t mean it has to happen to you. If you’re on the brink of ending your marriage, don’t let money matters take a backseat while you’re navigating the divorce.
Here are our tips for safeguarding your credit during a divorce:
1. Close joint accounts. Joint accounts are those that are in both spouses’ names. In the case of joint accounts, you’re both responsible for the debt regardless of what the divorce decree says. If you leave a joint credit card account open, nothing’s stopping your spouse from maxing out the card or charging their divorce attorney’s fees on the account.
Also, if your spouse misses a payment or stops paying altogether, you’ll be on the hook and your credit will take a hit. As long as your name is on the account, if your former spouse defaults, the creditor will report the negative account activity on both of your credit reports. Don’t let this happen to you!
2. Remove authorized users. If your spouse is an “authorized user” on any of your credit card accounts, remove your spouse from those accounts immediately. By tackling this issue in the beginning, you’re reducing the risk of your spouse going out and charging any unauthorized debts that you’d be ultimately accountable for. Also, revoke your spouse’s authorization by sending a certified letter to the credit card company explaining your divorce and your intentions.
3. Keep track of open accounts. If any joint accounts end up surviving the divorce, contact the creditor and have them mail monthly statements to your work, P.O. Box, or home address. Pay close attention to these accounts that your former spouse is paying and if a payment is missed, take action immediately to ensure your credit isn’t negatively affected.
4. Reconsider keeping the house. Often, spouses act like the marital residence is some kind of “prized possession” in the divorce when it’s anything but. Even if you’ve raised your children in the home and built many fond memories, it doesn’t mean you should keep the house. If you have loads of equity and you can easily afford the mortgage, it may make sense to fight for the house, but in today’s real estate market, that’s more the exception than the norm. Newly-divorced individuals are often cash-strapped and can’t afford to take on big housing expenses. Before fighting for the house, make sure it’s more of an asset than a liability. It may be better to sell the house, split the proceeds and go your separate ways.
In closing, we want to mention the benefit of freezing your credit files. If your spouse has already proven to you that he or she is vengeful by intentionally using your Social Security number to open credit card accounts in your name, you can place a fraud alert on your accounts. By freezing your credit files, your spouse can be blocked from using your identifying information to ruin your credit and rack up new debt in your name.