Heading for a divorce can be stressful. Nobody likes a divorce. Many people take a beating on their credit score post divorce, though divorce is not a factor behind the drop in credit score. Marital status is not a factor which affects credit score in any way, so it doesn’t matter if you are single, married, separated or widow/widower.
Divorce has no direct impact on credit score, instead it leads to financial conundrum which in turn makes credit score take a beating. For example, losing a partner with sizeable income which helped repay loans, may cause missed or delayed payments, which is a red flag when it comes to credit score.
Divorcing spouse can hurt your credit score as this can lead to missed payments on joint credit accounts held with your spouse or deemed to be ex-spouse.
If the payment on loan is missed, then credit score of both the spouses would take a beating. In spite of the particulars mentioned in the divorce agreement, the original credit agreement would still stand valid and hence missed payments would reflect in credit reports of both the separated ex-spouses. There are instances of individuals intentionally missing payments to hurt their ex’s credit score.
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You must note that repayment history and the amount of debt are two of the biggest factors affecting credit score. Having a good credit track record of repayments and keeping debt on the lower side during and after the divorce, helps keep a check on the credit score.
Here are the recommended steps to maintain your credit score post divorce:
Live on reduced income: If you were living on two incomes, then restricting yourself to a single income can be difficult. This will take a few major lifestyle changes including selling your house to buy a less expensive one to reduce your home loan EMIs, and moving to a rented apartment/house. You might have to consider commuting through public transport by giving up the luxury of travelling in your own car/bike. You might have to cut down on living expenses and give up on certain habits like alcohol and cigarettes.
You must come up with a proper financial plan. Allocate a budget for each expense and find out the things you can afford. Prioritize expenses that are really important and have direct impact on the credit score. Try and cover basic expenses from your own income. You mustn’t include alimony and child support under this.
SEE ALSO: Check Credit Score Online
Handle your joint debts: Share your financial burden with spouse, when you feel divorce is inevitable. This makes things simple and clear and facilitates a smooth transition. You must review your credit report and list out the joint credit accounts, be it credit card, home loan, vehicle loans or any other sort of debt. If possible, you must pay off the outstanding balance and request creditors or lenders in writing to close these accounts immediately and not to reopen them, unless you request the same.
You must remove spouse or deemed to be ex-spouse’s authorization from credit cards. You must consider requesting for a new credit card to ensure that your ex-spouse does not have any details of your credit card.
You must sit with your ex-spouse and analyze the debt that he/she is responsible for and contact the lender to transfer the outstanding balance to their name. You can heave a sigh of relief as you are no more responsible for their debt. If you and your ex-spouse cannot work this out, then you must go through legal ways to tackle this issue. Meanwhile, try and make at least the minimum payment on credit accounts, so that your credit score is not badly affected.
You must never depend on your ex-spouse for the payment on joint credit accounts; this includes home loans, vehicle loans and other sort of debt. Your ex-spouse might not be as concerned as you are when it comes to having a good credit report.
Keep a track of repayments: If your ex-spouse is responsible for repaying credit accounts in your name, then you must keep a track of the due dates and check if the payment is done as the due date approaches. To safeguard your credit score, you must ensure paying at least the minimum amounts. Request the judge to direct the deemed to be ex-spouse, reimburse all the payments you make for the debts, which he or she is responsible for.
Monitoring credit score is highly recommended in order to keep a track of payments. You must note that the damages are already done via-a-vis credit score, when the payments are missed. All you can do is request your ex-spouse to make regular payments or you make the payments yourself to avoid credit score, dropping.
SEE ALSO: Credit Score India
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