Does Divorce Impact Your Credit Score?
April 25, 2022

Getting a divorce is never easy. It’s one of the biggest changes anyone has to go through, and it will affect every aspect of their lives, including their finances.

The biggest mistake people make after a divorce is not looking at how a sudden life change like a divorce could impact their credit score. In this article, we break down the different ways a divorce affects your credit score, as well as some tips on how you can protect yourself from financial ruin.

Missing Payments on Joint Debt

When a couple gets married, they usually combine their finances. This means a lot of things, but most people think of their bank accounts and a credit card that they share. However, they might also share a mortgage, car payment, and other debt.  It is important to remember that most debt incurred during the marriage is “marital debt” even if it is only in one spouse’s name.

In the event that your spouse is determined to be responsible for joint debt, if that debt remains in joint names, you (the non-responsible spouse) continue to be responsible in the eyes of the lender. If your former spouse doesn’t make payments on time, your credit score will be negatively affected, and you could be held responsible for all the late payments. The lender can also hold you responsible to pay all the late fees that have accumulated on the debt.

This is why it is important to make sure that any debt that is the responsibility of your former spouse is transferred into his or her name alone after the separation.

Credit Card Payments

Credit cards can get a little confusing in the event of a divorce. At the beginning of a marriage, a couple may have one credit card account, but over the course of their marriage, each may also open up credit cards in his or her individual names or additional joint credit cards.  Nearly all credit card debt incurred during a marriage will be considered “marital debt” regardless of whose name is on a credit card.

If you are the person who has kept up with the payments and you want to keep the card under your name, you should talk to an attorney to see if you can transfer the balance out of your ex-spouse’s name and into your own. Sometimes this is as simple as removing your spouse as an “authorized user.” Sometimes it is more difficult, when it is truly a jointly held credit card.

Until a card is transferred out of joint names, each spouse remains liable for the debt in the eyes of the lender. If you do decide to close the card, then you need to make sure that you do not have any outstanding charges on the card.

Defaulted Loans

A lot of couples get loans to buy a second home or a vacation home. A court can resolve the question of liability for a joint loan if you and your ex-spouse are unable to agree on it. If you are ordered to pay for a joint loan, and you don’t, your credit score will suffer.  In the vast majority of cases, if you keep the asset, you also keep the debt associated with the asset.

While the divorce is pending, the best thing to do is to pay for the loan as agreed upon with your ex-spouse. This will ensure that your credit score is not affected by the lien on the property. If you cannot reach an agreement, you should again talk to an attorney.

Once a divorce is final, any jointly held loan will need to be refinanced or assumed into the name of the spouse responsible for paying.

Contact Our Divorce Lawyers in Pennsylvania

A divorce can be a difficult life event for a person to go through. It can also be difficult for their finances. Not only do they have to deal with the divorce itself, but they also have to consider the aftermath. To minimize the financial impact of a divorce on both parties, it’s a good idea to follow these tips and consult an attorney before the divorce is finalized.

At Daley Zucker, LLC, we recognize how difficult it is to sort out your finances while going through a divorce. As reputable divorce lawyers in Pennsylvania, we are committed to staying connected with your needs and helping you resolve your legal issues involving your family, estate, and finances. Contact us today to partner with our legal team!

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