Divorce is a significant life event that can affect you in numerous ways, including impacting your credit. Being proactive can help you avoid financial challenges. A lawyer with our family law firm can assist you with protecting your credit throughout your divorce proceedings. We can advise you on handling debts, joint accounts, and other financial matters if you are seeking a divorce in Alabama.
How Divorce Can Affect Your Credit Standing
Your marital status does not appear on your credit report, so getting a divorce will not factor directly into your credit score. However, there are financial changes and logistics that may occur during a divorce that can affect your credit if you do not learn how to protect it. In fact, a recent survey by Debt.com found that 51 percent of respondents reported taking on debt after their divorce. Even worse, 28 percent stated that their credit score dropped by more than 50 points as a result of the divorce.
Divorce can affect your credit in the following ways.
Decreased Income and Missed Payments
After a divorce, you may have less income and find it harder to make ends meet. Changes in your financial situation can lead to missed or late payments, which can negatively impact your credit. In addition, the stress and upheaval divorce can cause in your life can result in unintentionally overlooking bills or their due dates. Financial planning can help you avoid these issues.
Decreased Access to Credit
Removing yourself from your credit cards and loans held with your spouse can impact various aspects of your credit report, including your:
- Credit utilization – How much you owe on all accounts compared with your total credit
- Credit age – The average time all of your accounts have been open
- Credit mix – The diversity of your credit and loan accounts
These changes can affect your credit score and potentially limit your access to new lines of credit.
Shared Debt
Divorce does not erase your responsibility for paying shared debts. If you cannot pay off joint debts before finalizing your divorce, you and your ex-spouse will both be on the hook for paying back credit cards and loans. This shared debt will impact your credit score.
Check Your Credit Reports and Monitor Your Score Early
Learning how to protect your credit during a divorce is essential to safeguarding your financial future. One of the first and most important things you can do is request a copy of your credit report early in the divorce process so that you know what is tied to your name. You can usually get free reports from all three major U.S. credit bureaus: Equifax, Experian, and TransUnion.
Your credit report will inform you of your open accounts, balances, payment history, and any issues with your credit, such as collection actions or bankruptcies. You can use this information as a guide to help you close accounts, pay off balances, or address financial problems you may not be aware of.
Continue to check your credit report weekly throughout your divorce so you know immediately if anything changes or if anyone opens new accounts in your name.
Managing Joint Debt and Separating Financial Accounts
It is vital that you separate your finances from your former spouse’s and make a plan for managing debt during divorce. You can still be held responsible for any debt that has your name on it. This includes new debt your spouse may accumulate, which can significantly affect your credit score.
Depending on your circumstances, you may want to:
- Close any joint bank accounts, credit cards, loans, or other shared lines of credit.
- Temporarily freeze accounts.
- Cancel any subscriptions or autopayments tied to joint accounts.
- Delete any payment information you have stored on platforms like Amazon, Apple Pay, or PayPal.
- Change your pins and passwords.
Divorce and joint debt can be a contentious issue. Ideally, you and your spouse should pay off shared credit card and loan debts before finalizing your divorce settlement if possible. If you can’t, you will need to ensure the debts are divided fairly. Our firm’s lawyers can negotiate debt repayments as part of your divorce settlement.
Communicating with Creditors During the Divorce Process
You should notify your creditors about your divorce as soon as possible. Your creditors can inform you of your options for handling outstanding debts, including assisting you with a payment plan. Update your billing and contact information with your creditors, as well.
When to Involve a Financial Professional
Our law firm can help you navigate the legal side of your divorce. We can also help you hire financial advisors and credit professionals who can assist with financial planning during divorce. We will work alongside these professionals, ensuring we develop a comprehensive strategy to protect your credit.
A financial professional can:
- Inventory your marital assets and debts
- Help you understand the tax implications of the divorce
- Work with you to make a plan to pay your taxes
- Help you plan for purchasing health, auto, homeowners, or other insurance plans
- Assist with retirement account divisions
- Assist you with budgeting and saving
- Advise you on strategies to rebuild your credit after the divorce
- Advise you on investment strategies
Prioritize Your Financial Health During Divorce
The legal team at Leigh Daniel Family Law can help you with protecting your credit in a divorce. Our family law lawyers serving Huntsville, AL, have more than 30 years of experience. We can represent you throughout the divorce process with personalized attention and compassionate service. We can seek a divorce settlement that safeguards your credit, fairly divides your debt, and leaves you with a plan for your financial future.
Our law firm has a five-star Google rating and numerous positive client testimonials, like the following:
“Leigh Daniel and her team made my divorce easy and stress-free. Everyone was very caring and helpful with any questions or concerns I had. I would strongly recommend Leigh Daniel to anyone looking for an attorney.” – Michael Walton
To learn more about how we assist you, contact us online or call today to get a case consultation with an experienced divorce attorney.
