Divorce is a life-altering event that affects more than just your emotional well-being. It can also have serious financial consequences. While divorce itself does not directly impact your credit score, the financial decisions made during and after the process can significantly influence your credit health. Understanding how divorce affects credit is essential for protecting your financial future.
At Kulerski & Cornelison, our team serves families DuPage and Cook counties. Our Illinois divorce attorneys provide comprehensive divorce services designed to protect your rights and your financial health along the way.
Divorce Does Not Directly Affect Your Credit Score
Credit reporting agencies like Experian, Equifax, and TransUnion do not factor marital status into their scoring models. That means your credit score will not drop simply because you are divorced. However, the financial ripple effects of divorce, such as missed payments, increased debt, and changes in income, can indirectly damage your credit.
Joint Accounts Pose the Biggest Risk
One of the most common ways divorce impacts credit is through joint accounts. If you and your spouse shared credit cards, loans, or mortgages, both of you remain legally responsible for those debts, even after the divorce is finalized. A divorce decree may assign responsibility for certain debts to one spouse, but creditors are not bound by that agreement.
If your ex-spouse misses a payment or defaults on a joint account, it can negatively affect your credit score. That is why it is crucial to:
- Close or refinance joint accounts
- Remove your name from shared credit cards
- Monitor accounts regularly for missed payments
Missed Payments and Increased Credit Utilization
Divorce often leads to financial strain. Legal fees, moving costs, and adjusting to a single income can make it harder to keep up with bills. If you rely more heavily on credit cards during this time, your credit utilization ratio may spike, which can lower your credit score.
Additionally, missed or late payments on any account can stay on your credit report for up to seven years. These marks can significantly reduce your score and make it harder to qualify for loans or favorable interest rates.
Divorce Decrees Do Not Override Lender Agreements
I tis a common misconception that a divorce decree can absolve you of financial responsibility. In reality, lenders are not parties to your divorce. If your name remains on a loan or credit card, you are still liable for the debt, regardless of what the court order says.
To protect your credit, work with your attorney to:
- Refinance loans into one person’s name
- Close joint credit cards
- Document all financial agreements
Vindictive Behavior Can Harm Both Parties
Unfortunately, some divorces involve spiteful financial behavior. An angry spouse might max out joint credit cards or stop making payments to damage the other’s credit. While this may seem like a way to “get even,” it often backfires. It can hurt both parties’ credit scores in the process.
If you suspect this kind of behavior, consider placing a fraud alert on your credit report and monitor your accounts closely.
Steps to Protect Your Credit During Divorce
Here are some proactive steps to safeguard your credit:
- Check your credit reports from all three bureaus to identify joint accounts and potential red flags.
- Freeze or close joint accounts to prevent unauthorized charges.
- Set up payment reminders or automatic payments to avoid late fees.
- Establish individual credit by opening a new credit card or loan in your name.
- Work with a financial advisor to create a post-divorce budget and debt repayment plan.
Understand the Impact of a Divorce on Your Finances and Credit Score
Divorce does automatically damage your credit, but the financial fallout can. By understanding the risks and taking proactive steps, you can protect your credit score and start your next chapter on solid financial footing.
At Kulerski & Cornelison, our team can help you with the legal, financial, and familial aspects of your divorce. Contact us today for a consultation of your case.