How Divorce Impacts Your Credit

A New Mexico divorce impacts many areas of your life, from how you live each day to your financial situation. In fact, many people who are headed into divorce worry about their credit because it can often be ruined by actions you take during the divorce process. A divorce does not negatively impact your credit on its own, but issues related to your divorce can end up harming it.

How does divorce hurt my credit?

As already noted, just the act of getting a divorce has no bearing on your credit; it’s the matters surrounding the divorce that may leave you with bad credit in the end. If, for example, you share bills with your ex post-divorce, you could end up with bad credit if your ex doesn’t pay his or her share or adds to the debt, leaving you unable to keep up with payments. Even if you and your ex came to an agreement about debt and bill responsibilities or the judge ruled that your ex is entirely responsible for certain bills, it can still hurt your credit if those bills go unpaid because your name is still attached to them and you’re still legally liable for them in the eyes of the creditor.

Protecting your credit during and post-divorce

Take a look at your credit score today and keep an eye on it as you move through the divorce. Talk to your lawyer about closing any joint accounts so you can avoid problems in the future and potential harm to your credit. If you’ve never had a credit card in your own name and your name alone, now is the time to get one so you can build up your credit. Commit to maintaining good credit now so that you’ll have more options and freedom when it comes to your financial future.
Make decisions regarding how to handle shared bills you’ll have to deal with post-divorce. With debts that are secured by an asset, one spouse can buy out the other spouse’s asset share and become solely responsible for the debt associated with it, such as with a house and its mortgage loan. Unsecured debts like credit card bills are handled in different ways. Both spouses may be jointly responsible for paying, or one person may take on the sole responsibility. In this case, having a shared payment and expense log can help you monitor what’s going on with bills that are still attached to your credit. Keep an eye on these types of bills so you can take action as soon as you notice something is amiss and before real long-lasting damage is done to your credit.
If you’ve never been conscientious about budgeting, now is the time to start. Some people end up with ruined credit after a divorce because they don’t adjust their spending habits in relation to their new financial reality. You are likely losing a household income, so you’ll want to tighten your belt now so you don’t end up struggling later and relying on credit cards to shore up any gaps. Make a realistic budget for your household and cut out unnecessary expenses as needed so you can pay for all of your basic necessities.
While a divorce alone won’t harm your credit, the scenarios it creates can. You may need to speak to a financial professional for help, and don’t hesitate to speak to your attorney about any concerns you have when it comes to your financial accounts. Your attorney can help ensure that bills and debts are properly addressed in your divorce agreement or by the court so you know exactly where you stand.