Fabio & Merrill

Your credit, divorce and financial future are tied together

Now that you've made the decision to divorce, you probably realize that your life is going to change in a lot of ways. Some of these ways are fairly minor, such as not wearing a wedding ring any longer. Other ways are more serious, such as having your finances turned upside down.

One way that your divorce is going to affect your life is that it will impact your credit. This may not seem like too big of a deal now, but you might find that it is life altering in the near future.

Divorce is civil

When you go through the divorce process, you and your ex are going to divide up all of the assets. You will also have to divide up the liabilities. What you might not realize is that creditors don't have to abide by the divorce order regarding who has to pay what. A divorce is a civil matter. The only parties who are legally obligated to follow the order are the parties who are named as the complainant and defendant. Creditors aren't either of these, so they can decide whether they will comply with the terms.

Status of accounts

One thing that you should do is close all joint accounts or freeze them so that new charges can't be made on them. If possible, open new accounts in your name only so that you are the person who controls what happens to them. You might consider doing balance transfers to individual accounts from the joint accounts you are liable for. This might help you to establish your own credit while taking care of some of the marital debts.

Probability of payments

As much as you probably don't want to think about your ex after the divorce, you will have to think about him or her for one purpose. You need to think about the probability that the payments on the debt accounts will actually be paid. Since you can't force creditors to hold your ex accountable for the debts he or she is supposed to pay, your credit might be negatively impacted if your ex doesn't make the payments on the account. This puts you in a precarious position. You have to decide if you are going to cover your ex's debts or take a hit to your credit report.

Negative impacts to your credit

The negative impacts to your credit that are caused by divorce start quickly and can occur even if all payments are made on time. When you get a divorce, your ex's income is no longer counted as part of your household income. This means that your debt-to-income ratio might go up. With a higher ratio, you will be less likely to be able to get new credit. This could prevent you from purchasing a home or vehicle.

It is possible to overcome the challenges that come with your credit as a result of a divorce. You might have to work hard to get your score back up, but making payments on time can help.

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