How Your Credit Score May Be Impacted by Divorce

While simply filing for divorce won’t have a direct impact on your credit rating, joint credit accounts, such as those for mortgages or credit cards, will if those accounts remain in effect.

It’s important to keep in mind that credit is reported for each person whose name appears on an account. So if you are a co-signer, joint owner or a permitted user, you will need to modify the account accordingly before initiating the divorce process. This may mean closing the account entirely or removing your name or your spouse’s from it.

If you don’t make changes and your divorce decree gives your former spouse responsibility for a joint account, you are still at risk. If the spouse listed in the divorce decree fails to make payments and the contract with the lender is unaltered, late payments will show up on both accounts and subsequently lower both spouses’ credit scores. Even missed payments occurring several years following the divorce will be reported for every person whose name appears on the account. The resulting negative impact on credit scores can be an unpleasant surprise.

Unfortunately, some people attempt to harm their spouse during a divorce by making large purchases on joint credit accounts, hurting their credit history and incurring large debts that will be difficult to pay off. At the same time, the offending spouse will likely unwittingly hurt his or her own credit score and history in the process.

That’s why it’s important to make sure that joint accounts are properly handled before or during the divorce process. This can be accomplished more easily when both parties work to maintain a civil relationship. The easiest solution is to close joint accounts and pay off existing debt before the divorce becomes final, but if this isn’t possible, you will want to convert the joint account into a single account. Your lender can assist with this process. It’s also important to check your credit score with all three nationwide credit bureaus before making any financial decisions about your divorce so you can proceed fully informed.

For knowledgeable advice on handling accounts during your divorce so that your credit isn’t negatively affected, consider working with the divorce attorneys at The Law Offices of Jennifer Courtney & Associates, P.C. We provide dependable representation for clients throughout Bucks County and the surrounding areas of Pennsylvania. Call our Yardley office at 215.493.3360 or contact us online to schedule a consultation.