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How does divorce impact your credit?

On Behalf of | Sep 8, 2022 | Property Division

Many people worry about what will happen to their credit score if they choose to divorce their spouse. For some people, it’s possible to walk away from a divorce with their credit score the same as it was when they were married. Others must concern themselves with the impact their divorce has on their debt-to-income ratio since that’s a primary factor in granting credit. Learning about how credit can be affected 

How can damage to credit occur?

You enter into an agreement with your creditor when you open up a credit account with them, but your divorce decree doesn’t bind them as they didn’t have any role in negotiating a settlement in your case. Divorce is a civil matter between you and your ex, which means that even if your ex is required to pay for a specific bill, the creditor can still hold you accountable for it. 

Any payments that your ex misses during or after the divorce has the potential to impact your credit negatively. Your creditor will record any missed payments on your credit report so long as your name is still on the account.

Coming up with a debt settlement plan

The possibility of missed payments might encourage you to work out a deal with your ex to sell or exchange some assets to cover your marital debts. Alternatively, you and your ex might want to inquire if creditors will transfer your debt to individual accounts instead of joint ones.

Your property division agreement is important. You should work toward one that puts you in the best financial position possible. Your attorney can help you to determine what options you have at each step along the way.