This is How I Protected My Credit Score During Our Divorce
If you asked my friends to define me at age 18, they would probably have used words like “know-it-all,” “cheap” and “well-intentioned but controlling.” After a few more jabs, they would likely also tell you that I was discontent with loneliness and ultimately altar-bound.
That proved true when I met my first serious boyfriend and married him three years later. But the younger version of me was so concerned with settling down and warding off loneliness that I did not truly vet my now ex-husband. I ignored years upon years of very clear signs that he was unfaithful and unstable.
I eventually encountered proof of dozens of instances of infidelity and — with the support of my friends and family — was able to end the relationship with a dissolution (a joint petition for separation that avoided many of the drawn-out aspects of a divorce).
Being the frugal man that I am, I immediately wondered how a divorce would affect my credit score. Would creditors think a divorce implies instability, flakiness or unreliability?
Luckily, divorce does not put a black mark on your credit score in and of itself.
Divorce can, however, affect your credit indirectly. Here are a few ways — and how to avoid them.
1. Joint Accounts
If you and your spouse share credit cards, car payments, mortgages or other debts, tread lightly during your divorce. A judge may officially issue a divorce decree that puts your spouse in charge of an account, but lenders will ding both of your scores if your spouse misuses that account, even years down the line, according to Experian.
What to Do:
Close out all joint accounts, sell all shared properties (or sign them over to one spouse) and make sure you share no payments on anything. Until you have removed your name from all shared accounts, monitor them even if the divorce decree put your spouse in charge.
If your spouse is not paying those debts, pay them yourself or risk adversely affecting your credit score. NerdWallet.com explains that you can always recover this money later by reporting lack of payment to the court.
My spouse and I thought we had successfully closed out all joint accounts, but leave it to the IRS to send us a document a year after the divorce stating we had paid our state taxes incorrectly and owed more money. Of course, my ex was almost always unreachable and would not comply with paying his fair share. Ultimately, I paid off the bill myself rather than have it affect my credit, then hounded him until he coughed up his end.
Closing out accounts such as credit cards will show up on your credit report, but the damage to the score is minor and can be repaired with good credit usage going forward.
2. Evil Ex as an Authorized User
Aside from joint accounts, you may have accounts solely in your name, on which you’ve designated your ex-spouse an authorized user. If your spouse is feeling particularly spiteful, he or she can easily rack up debt in your name and have no legal obligation to pay it off. This makes authorized users very dangerous.
What to Do:
Immediately upon deciding to separate from your spouse, remove him or her from these accounts that are solely in your name. This action can be taken without your spouse (it is your account, after all) and is crucial, as the time immediately following your decision to separate can be volatile.
3. Change in Financial Situation
Finally, your divorce will likely change your financial situation, for better or for worse. It may be your savings being gutted, the loss of a second income or even having to go back to work after spending years as a stay-at-home spouse or parent. You might also have new bills, such as alimony or child support.
What won’t change automatically, however, is how much you owe for your existing bills: utilities, insurance, rent, you name it. This sudden loss in income or increase in expenses can make it easy for you to drown in debt.
I fortunately had a steady job and savings to keep me safe, though my ex did manage to take a large chunk of money from my savings that was not his before I could take him off the joint account. (I did not battle for it in our dissolution because it was more important to me to avoid legal fees for a divorce and to make sure I was able to keep our dog, as was specified in our dissolution agreement.)
It also helped that my spouse was expensive (high insurance rates because of a poor driving record, expensive vices, etc.), so I was actually able to reduce my monthly expenses after separating.
What to Do
If you find yourself in a bad financial situation following your divorce, you will need to make some changes. TheBalance.com recommends making a whole new budget (I love Excel for this, but there are great apps like Wally and Mint that you can use) and looking at where you can cut expenses.
Sometimes, this might be as drastic as selling your new car and buying a used one, downgrading your apartment or even moving in temporarily with friends or family while you get back on your feet. I got a roommate (half for the help with expenses, and half because I was not accustomed to living alone).
The alternative to decreasing spending is increasing your income. That is easier said than done, of course, but NerdWallet.com recommends asking for overtime, freelancing or taking a part-time job. You could even try out a side gig like driving for Lyft, which will not only help you earn extra cash but will also introduce you to new people who live in your area.
Even if a relationship is toxic and divorce is the answer to your prayers, the experience is never without heartache and strong emotions. Give yourself one less thing to worry about by taking action to protect your credit throughout this difficult experience.
Timothy Moore is a writer and editor based out of Nashville, but he is also a survivor of a crappy relationship and a much-needed divorce. If you’re going through a divorce, he would like to remind you that, with time, things will get better.