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How to Protect Your Credit During Divorce

To say that divorce is stressful is an understatement, and financial and legal matters compound already strained relationships. That why it’s important for you to protect your credit during divorce. These tips will help keep your credit score from plummeting.

Hope for the Best but Prepare for the Worst

Sometimes divorces that start out amicable enough turn ugly. People who feel hurt or betrayed can do unpredictable things, so it’s essential that you be prepared for the worst possible scenario when it comes to your finances. When divorce is imminent, it’s time for a few changes.

Remove Your Ex as an Authorized User of Your Credit Card

If your spouse is listed as an authorized user, he or she is allowed to use your credit card for purchases but will not be responsible for repaying any of your credit card debt. Removing an authorized user is very easy, and it should be done right away. All you have to do is call the customer service number on the back of your credit card and tell them you want to remove your spouse as an authorized user.

You should also make sure that your name is removed from your spouse’s credit cards. Even though you might not be responsible for making payments on that credit card debt, negative history could still be reflected on your credit score.

If your spouse refuses to remove you, you can try calling the card issuer yourself. If they refuse to make the change for you, call the credit reporting agencies to dispute the account’s inclusion on your report.

Separate Joint Accounts

If you and your spouse are listed as co-borrowers on a mortgage, for instance, you’ll need to take action. The only way to have one or both names removed from a mortgage contract is to work directly with your lender.

In these circumstances, the best-case scenario is to pay off and close joint accounts before the divorce. For example, selling the home and dividing the equity. If closing the account isn’t an option, you may be able to turn over the account to just one person. A mortgage assumption or refinance might be an option when it comes to your home loan, while credit card debts can often be transferred to a different card issued in one name only.

Any account responsibilities that can’t be ironed out before the divorce need to be stipulated in the the official divorce agreement. Spell out who pays for what in the document, and cover any contingencies. For example, you can stipulate that if your ex will be late making a payment to a joint account that he or she must notify you in advance so that you can take steps to prevent negative marks on your credit report.

Keep a Close Eye on Joint Accounts

Once the divorce is final, monitor account statements to make sure your spouse is meeting his or her obligations. You should also request your free credit report every four months. (You get one free report per year from each agency, so use a different agency each time.)

If you discover that your spouse is not meeting the financial obligations outlined in the divorce agreement, you should contact your attorney immediately. In many cases, the court will require that your spouse cover legal fees and reimburse other expenses if a creditor turns you over to a collection agency.

Update Your Address

In addition to updating your address on your accounts, you should also submit a formal change of address with the USPS. This ensures that you get bills and notices and that they aren’t maliciously or mistakenly kept from you by your spouse. Missed payments can become a problem, especially at a time when stress makes it harder to keep track of all of your financial commitments.

Create a New Budget

It’s a big adjustment if you’re moving from a dual-income household to a single-income household. Take advantage of free budget worksheets so that you can accurately assess how much home you can afford in light of your changing income. Consider any required credit card, student loan, and car loan payments when calculating how much to spend on rent or mortgage.

By taking these steps, you can keep a bad situation from becoming worse and protect your personal credit rating.

Emily Suess

Contributor at Fundera
Emily Suess is a contributor for Fundera and a freelance blogger and copywriter specializing in technology and small business.