Protecting Your Credit During a Divorce

SBLI of Massachusetts

December 15, 2010

If you have joint debts with your spouse and are going through a divorce, you could be facing rough credit waters in the future. A divorce itself does not cause bad credit. Nonpayment of joint debts by either party after the divorce can. No matter what you and your former spouse agree on or what the divorce decree states, you are both equally responsible for all joint debt, and if either person defaults on a joint debt, it will affect the other’s credit.

Step One: Prevent New Debt
About.com (http://divorcesupport.about.com/od/maritalproblems/ht/divorce_credit.htm) suggests the first step in protecting your credit, prior to or during a divorce, is to close all joint accounts. That prevents any new debt from being added to the tally.

Step Two: Notify the Lenders
The Washington State Bar Association (http://www.wsba.org/media/publications/pamphlets/Dissolution.htm) mentions in their Marital Dissolution pamphlet that you can contact creditors in writing and ask for your name to be removed from any accounts that the divorce decree orders your former spouse to pay. The creditors are under no obligation to do so, but if you send them a copy of the decree and a polite letter asking to be removed, they may comply.

Step Three: Monitor Your Credit Report
In order to stay informed of any changes in your former spouse’s payment history on joint debts or to find new debt that should not appear in your name, request a copy of your credit report from all three credit bureaus every few months.

Step Four: Pay Your Debts on Time
Be sure to promptly pay any joint or individual debts for which you are responsible. Remember, not only is your former spouse responsible for your credit on these joint debts, but you are also responsible for his or hers.

Step Five: Open Individual Credit Accounts
One of the most important factors in determining your FICO score is the length of time you have your oldest open account. With all your joint accounts closed, this may mean you have few or no old accounts. Opening an account soon after your divorce helps you to reestablish individual credit. Since your income may be smaller as an individual than it was as a couple, be sure to use credit cards responsibly, and not charge more than you can pay off each month. You don’t need to pay interest in order to get (or maintain) good credit.

Step Six: Review Your Life Insurance Policy Periodically
Even if you have a policy, recent or upcoming changes in your life will likely necessitate additional coverage. Call an insurance professional for a free review.