How Divorce Can Impact Your Credit Score

While the legal act of divorcing won't directly lower your credit score, the financial fallout certainly can. The process unravels shared finances, creating situations that can negatively impact your credit history.

1. Joint Account Responsibility: A divorce decree may assign a debt to one spouse, but lenders aren't bound by it. If your name remains on a joint account, you are legally responsible for the debt until it's paid off or refinanced.
2. Late or Missed Payments: If your ex-spouse is tasked with paying a joint credit card or loan but pays late or stops paying altogether, those negative marks will appear on both of your credit reports, damaging both scores.
3. Increased Credit Utilization: Setting up separate households often leads to higher individual expenses. Relying more heavily on credit cards can increase your credit utilization ratio, a key factor that can lower your score.
4. Closing Accounts and Reduced History: Properly closing joint accounts is a crucial step. However, doing so can reduce the average age of your credit history and decrease your total available credit, both of which can have a temporary negative effect.

How Much Will Divorce Affect Your Credit Score?

While divorce itself doesn't directly lower your credit score, the financial fallout certainly can. Here are several ways the process can indirectly affect your credit health.

• Joint Accounts: Late payments on shared accounts will negatively impact both spouses' credit reports, regardless of who is responsible. It's crucial to address these accounts promptly during the separation process.
• Dividing Debt: A divorce decree may assign a debt to one spouse, but lenders aren't bound by it. If your name remains on the account, you are still legally responsible for the payments.
• Changes in Income: A lower household income after a split can make it difficult to keep up with payments. This can lead to missed payments and a subsequent drop in your credit score.

How You Can Avoid Divorce Affecting Your Credit Score

Close or Refinance Joint Accounts

Promptly close joint credit card accounts to prevent new charges. For larger debts like mortgages or auto loans, work to refinance them into an individual's name. Until an account is closed or refinanced, both parties remain legally responsible for the debt to the lender.

Remove Authorized User Status

If you are an authorized user on a former spouse's account, request to be removed. The primary account holder's spending and payment activity can still impact your credit report. Removing yourself severs this connection and protects your score from actions that are out of your control.

Choose the Right Card to Divorce

Fortunately, improving your credit score is always possible through consistent, positive financial habits. By following some proven methods, most people can see meaningful changes within just a few months.

• Monitor your credit reports. Regularly check your reports from all three major bureaus—Experian, TransUnion, and Equifax—to identify and dispute any inaccuracies or signs of fraud.
• Set up automatic bill payments. Your payment history is the single most important factor in your credit score, so ensuring every bill is paid on time is crucial.
• Lower your credit utilization. Aim to use less than 30% of your available credit, as a lower ratio signals to lenders that you manage debt responsibly.
• Become an authorized user. If you have a trusted friend or family member with a strong credit history, being added to their account can help boost your own score.
• Diversify your credit mix. Lenders like to see that you can responsibly manage different types of credit, such as credit cards, installment loans, and mortgages.
• Limit hard inquiries. Space out your credit applications and use prequalification tools whenever possible to avoid multiple hard pulls on your report in a short time.

The Bottom Line

While the act of divorcing doesn't directly harm your credit score, the financial decisions made during this time, such as handling joint accounts, can have a significant impact.

Frequently Asked Questions

Will getting divorced automatically lower my credit score?

No, the act of divorcing itself doesn't directly impact your credit score. However, financial changes resulting from the divorce, like missed payments on joint accounts, can.

Am I responsible for my ex-spouse's debt after the divorce?

For any joint accounts you co-signed, yes. A divorce decree doesn't absolve you of this responsibility in the eyes of the lender, only a creditor can.

How can I protect my credit during a divorce?

Close joint accounts, remove your ex as an authorized user on your cards, and monitor your credit report regularly for any inaccuracies or suspicious activity.