How will divorce impact my credit?

On Behalf of | Dec 29, 2020 | Family Law

Buying a new home or a car may be a top priority of yours after you complete your divorce. To successfully apply for a loan or a mortgage, you will need a good credit score. While it is possible for your divorce to negatively impact your credit, it is by no means inevitable. 

As Bankrate explains, you affect your credit by the amount of money that you spend. If you make regular payments on personal debts and keep your debt-to-income ratio as low as possible, you may maintain a high credit score. However, your credit score could also drop due to expenses you make with your spouse during your marriage. 

The problem with joint debt

If you and your spouse have taken out a mortgage or a loan or if you share a credit card, you also share some of the financial obligation to pay off the debt. This obligation continues even if you divorce. In the event your ex-spouse does not contribute to the payments, you are on the hook for the outstanding amounts. If you cannot pay them, your credit score will take a hit. 

Ways to deal with debt

There are steps you may take during your divorce to head off debt problems before your credit suffers. If you have a credit card with your spouse, consider how to get your name off it or work out a way with your spouse to close the account. You may also refinance a jointly owned loan so that only you or your spouse bears the responsibility for paying it off. 

If possible, you might try to pay off debt before the divorce is complete. This is only if your financial situation allows for it. You may deplete your assets and leave little for a post-divorce life by expending too much on debts. Instead, you might work out ways to pay off debt over a period of time. 

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