Divorce and your credit

When faced with divorce the last thing on your mind may be your credit, but it’s imperative you step away from the drama for a moment to clear your thoughts and create a plan. Part of that plan should include your credit as it will be an integral piece of recovering from the split.

This is not legal advice and should not be construed as such. You should always seek advice from your legal counsel and mortgage professional.

Understand, your creditors are not bound by your divorce decree so at the end of the day, whoever is on the account will owe and feel the impact of negative (or positive) account credit history.

The first thing you need to do is pull your credit report from all three bureaus (Equifax, Experian, Transunion) and get clear on your credit accounts.

With report in hand you’ll need to determine:

  • The accounts that are held only by you.
  • The accounts that are held jointly.
  • The accounts that have you, or your ex, listed as an authorized user.

Once you have nailed-down account information, contact all creditors and inform them of the separation and update all personal information such as: new address, employment and other necessary contact information.

Now let’s look at how best to manage different types of accounts:

Joint Accounts – These accounts can sometimes be challenging to split; however, there are ways to protect the integrity of your credit:

  • Checking/Savings/Investment Account(s):  Open new individual accounts. You’ll need to start a new solo nest-egg and prepare for either rent or a down payment for a new home purchase.
  • Auto Loan(s):  Refinancing an auto loan should be relatively simple; typically, these types of loans are quickly and easily refinanced.
  • Mortgage Loan(s): The only way to remove a name from the mortgage note is to refinance. The lone borrower will need to qualify using his or her sole income, assets and credit. When deciding how to best manage a mortgage debt it’s best to speak with an attorney and mortgage professional.

Joint accounts can sometimes be challenging to close, but it’s wise to close as many jointly held accounts as possible to limit personal liability.

Authorized User – While these accounts merely list you (or your ex) as an authorized user, the behavior of the other can impact your credit so it’s wise to immediately sever the authorization. These types of accounts are typically easy to manage with the creditor’s customer service department.

If there are accounts you cannot sever for whatever reason your best option would be to contact the creditor and request the account be frozen until the a divorce settlement has been issued. This will prevent additional charges to the account.

Divorce is not an easy process and can be an emotional and financial drain. Once the dust settles and once ready to move on you’ll find the health of your credit can assist you in moving forward on a new path.

Continue to visit Guaranteed Rate for more educational, jargon-free mortgage-related topics.

Start today and pull your credit with:
Annual Credit Report
Credit Karma
Credit Sesame

Continue Your Guaranteed Rate Education
Your Credit, the First Step in the Home Buying Process
How to Read Your Credit Report
How to Manage Your Credit

Your mortgage. Your way.

Get started on your Digital Mortgage!
All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Guaranteed Rate, Inc. does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Guaranteed Rate, Inc. Guaranteed Rate, Inc. its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.