There’s just no getting around it — divorce is hard! No matter when or how it happens, both spouses usually suffer, and the loss isn’t merely emotional. The thing that nobody wants to think about is how bad a hit your finances are going to take. But unfortunately, it is one of the factors hit hardest during the process.
Protecting Credit in Divorce
Your credit score can take a major hit during a divorce, and this is due to several factors. First of all, your finances might be severely affected if you are suddenly knocked down from a two-income household to one income. And this may lead to late payments by one or both of you on either your own or joint accounts.
Secondly, divorces are ugly, and unfortunately, sometimes there is some hostility between the two parties. If you have a vindictive ex-spouse, he or she could wreck your finances by refusing to help pay the bills on accounts you once shared.
And lastly, your spouse may not tell you when they fall behind on payments for joint accounts, either out of embarrassment, hostility, or just plain forgetfulness. You are both, after all, probably going through a very traumatic ordeal and finances may be further from your spouse’s mind than yours.
But if you prepare yourself ahead of time and take some precautionary measures, you could absolutely come out on the other end of this thing unscathed, at least credit-wise.
1. Close All Joint Accounts ASAP
There may be some you can’t remove a name from without a court order, such as a mortgage or other large loans. But take every available measure to get your name off of anything that your spouse should be paying for and vise versa, so that there is no chance for them to ruin your credit by lagging on installments.
2. Notify Creditors
While you are still responsible for any accounts with your name on them, contacting your creditors early on can help you get your payments lowered or allow for extensions. Some lenders, especially credit card companies have forbearance policies in place for just this type of situation.
3. Monitor Your Credit Reports
Keep a close eye on your credit reports by checking them monthly, especially for the first couple of years after your divorce. This can help notify you if your ex-spouse takes out a loan in your name. Then you can immediately dispute it using your divorce decree as evidence that your name shouldn’t be on it. It will also keep you up-to-date on how well your spouse is holding up their end of the bargain to make your joint payments.
4. Place a Fraud Alert on Your Credit Profile
If you already know you shouldn’t trust your ex or have noticed some shady activity on their part, consider having a fraud alert placed on your credit report. You will have to do this with each of the three major credit bureaus, but once you do, creditors will be alerted when anything suspicious happens. This way, you can nip potential problems in the bud before they have a chance to wreck your credit.
5. Keep Track of Your Statements Online
Nearly every lender in the world has a way for you to register for online services. Make a list of every joint and individual account you have and sign up for each one. This will allow you to monitor the payments frequently and make provisions for any payments your ex might fail to take care of. You might decide it is better to make a payment yourself than to risk a blemish on your creditworthiness.
6. Consider Giving Up the House
It may be difficult to do, but if finances are a huge issue, it might be worth it to part with the house.
If your divorce decree allows you to sell the home and split the profit, you could possibly pay off your joint accounts and sever ties completely right from the beginning.
But the decision is ultimately one you will have to make while you take into account some significant factors.
7. See a Financial Planner
If you are worried at all about keeping your finances in order, seek the advice of a good financial planner. They can help you with things like figuring out how to split assets and planning for your child’s college fund. It is best if you can do it with your spouse before the divorce to keep you both on track, but even if you can’t, do it as soon as possible.
None of these tips will make divorce any easier, but they could help save your credit in the process. Although the pain can be unbearable at times, you have to remember that you’ll need to sustain yourself long after your spouse is gone. Once you are single, you may have to rely on your credit score to rebuild your future. And if you don’t take the necessary steps to protect it, you could find yourself in way more turmoil than you ever imagined. Don’t allow your current situation to blind you from good judgment.