Divorce can be stressful, regardless of how amicable your divorce is.
For some people, a divorce is a relief; for others, it is a tragedy. No matter how you feel about it, you will inevitably have a lot on your plate while getting through it. There are the legal issues, financial negotiations, court hearings, forms to fill out, and possibly even custody battles, none of which are in the least bit enjoyable. Then, to top it all off, there is the impact it will have on your future.
One of those areas that a divorce can impact is your credit and your credit score. It isn’t enough to look at the overall financial situation that a divorce may bring. Instead, a few other essential areas could seriously impact your credit and financial future. Here are four significant ways that a divorce can damage your credit score:
1 – Joint Bills and Co-Signed Loans
Splitting up assets and possessions may be at the forefront of your mind while dealing with a divorce, but most married couples also share at least one, if not several, co-signed loans. Mortgages, car loans, credit cards, and the like require regular payments. Once you’ve separated, those payments will still be required.
A common issue is when one party takes ownership of an asset, such as a vehicle, but stops paying the loan while your name is still attached, affecting their credit and yours. If possible, you should untangle any accounts you share with your former spouse or keep a close eye on them. If you cannot remove your name from the account, you will still be responsible if they neglect to make payments on time. Late payments can quickly lower your credit score and delinquent accounts more so.
2 – Creating a New Budget
Many aspects of a divorce circle back to finances. After the divorce, it is essential to hash out your finances to create a new budget. If you take over certain loan payments, make less money than your former spouse, or are required to make alimony payments, you will need to re-establish your monthly budget and financials, which will help ensure you can still make your credit or loan payments on time.
Divorce also comes with its slew of costs – lawyer and court fees and assets that you split – and it could drain any rainy-day funds you may have set aside. Make sure that you work out a new budget that will allow you to replenish your savings to avoid financial problems down the road that could damage your credit.
3 – Shared Accounts
A typically more sensitive subject is shared or joint bank or credit accounts. Despite any trust you may have in your former spouse; you should consider removing them as an authorized user on any accounts you own. Especially with credit or loan accounts, a vindictive ex-spouse could cause severe damage to your credit.
It would be wise to change bank account passwords and the passwords on any accounts that allow someone to order or purchase something using your stored billing information.
4 – Ex-Spouse Files Bankruptcy
Another way a divorce could seriously impact your credit score is if your ex-spouse files for bankruptcy. Even long after you finalize your divorce, if your ex-spouse has any loans or lines of credit that still have your name on them when they file for bankruptcy, it could harm your credit score.
To avoid having this affect your credit, make sure your name is no longer on any loans, mortgages, or lines of credit if possible. It is also helpful to check your credit report regularly following a divorce to watch for any potential problems or errors.
If a recent divorce has already impacted your credit score, or you need assistance increasing your credit score, contact Credit Repair Enforcers today for a free consultation.
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Credit Repair Enforcers fight for your credit rights!