Divorce can be emotionally and financially challenging. On top of dividing assets and managing family dynamics, many people overlook the importance of protecting their credit score during this time. A healthy credit score is vital to secure loans, mortgages and credit cards, so it’s essential to keep it intact during and after a divorce.
What is a credit score?
Your credit score, otherwise known as a credit rating, is a measure of your creditworthiness. That is, your ability to repay loans or pay bills based on their financial history. This information is collected and maintained by credit reporting agencies and can be accessed by banks and other financial institutions when applying for a loan or other credit products.
Although credit scores are not directly impacted by divorce, it can be affected if you begin to miss payments on credit cards or loans, or if your former spouse fails to make payments to debts that are also in your name, such as a mortgage or shared credit card.
Who is responsible for repaying loans after divorce?
The court will assess and indicate who is responsible for paying which bills following divorce or separation, which will be outlined in the property settlement. However, just because one party has been allocated a debt to repay, it doesn’t necessarily mean they will pay it. For example, if your ex-spouse fails to fulfill their repayment obligations on a debt that still has your name associated with it—such as a joint loan or credit card—you can be held liable for the full amount of that debt. This means that if they miss payments or default, your credit score may be negatively impacted, and creditors might pursue you for repayment.
How can I protect my financial wellbeing and credit score during and after a divorce?
1. Separate joint accounts as soon as possible
It’s crucial to understand that even after divorce, any joint financial commitments remain in effect until they are formally closed or refinanced. Because of this, closing or separating any accounts, loans or bills that you share with your ex-spouse is the most important first step to take following your separation. If you can’t close the account immediately, ensure that no further debt is added to it by implementing a freeze. As long as your name is attached to these accounts, you remain responsible for any debt incurred.
2. Keep track of your payments
Missing a payment on any financial obligation can have a negative impact on your credit score. During a divorce, it can be easy to lose track of bills, particularly if there is a dispute about who is responsible for what. Make a list of all your financial obligations, including mortgage payments, credit cards, insurances and utilities and, if possible, set up automatic payments for any recurring bills to ensure you don’t miss any payments.
3. Review your credit report regularly
Regularly review your credit report during and after your divorce so that any issues, such as missed payments, can be identified early on. Find out how to access your report here.
4. Be cautious about obtaining new loans or credit cards
During a divorce, it can be tempting to take out new loans or credit cards to cover legal fees or other expenses. However, taking on new debt can negatively impact your credit score, especially if you’re struggling to make regular payments. It’s wise to avoid taking on additional debt until your financial situation is more stable.
