Ask virtually anyone who went through a divorce, and they’ll likely tell you that divorce can wreak havoc on your finances, and more specifically, your credit, as well.
While the act of divorce in itself may not adversely impact your credit score, the handling of debts before and following its finalization might. You must understand how divorce affects your credit so that you can take the necessary steps to minimize its impact.
Credit during marriage and following divorce
U.S. Census Bureau statistics published in 2019 showed how women often report earning less income than their male counterparts in the year following a divorce.
Experian published a study that same year in which they highlighted the impact of marriage and divorce on credit scores. They found that up to 54% of divorced women said their scores decreased during their marriages. At least 50% of them pointed to their exes as ruining their credit scores.
Joint accounts and their impact on your credit
The payment history for joint accounts that you share with your ex will remain on your credit report, even after finalizing your divorce.
While you and your spouse may agree to divide the assets you owe, your creditor has no obligation to honor your divorce decree. A creditor can come after you for debts that your ex becomes delinquent in paying regardless of whether you agreed to take on certain ones when you finalized your divorce.
These concerns often motivate divorce attorneys to warn their clients against leaving joint accounts with unpaid balances open.
Your options for dividing up debts during a divorce
Many divorcing spouses worry about the division of their tangible assets when they divorce. Few give much thought to how to split their debts. Know that there are various options for doing so, some of which may be more effective at protecting your credit score than others.
An attorney can go over the pros and cons associated with each debt division strategy with you. This knowledge may be helpful as you look to protect your financial interests as you embark upon this new chapter in your life.