A broken marriage can leave your financial life in shambles, especially if you have to take care of commingled accounts and accumulated assets. Assuming that you’d split everything equally, your finances will drop by half. But, if you are in for a rocky road, then your wealth can plummet even more.
Many couples who split can lack retirement savings. Mainly if they decided to call it quits after 55, according to AARP. While divorce won’t automatically demolish your credit score, it can negatively affect your credit file if you mishandle all those joint accounts. Here is a more detailed look at what divorce can do to your credit.
Can Divorce Negatively Affect Your Credit?
Divorce proceedings won’t create a direct impact on your credit score. Instead, they create a sort of like ripple effect. For example, when signing the papers, you can notice a drastic shift in your finances, such as changes in expenses, income and the amount of cash you can save.
When you tackle those joint accounts to reflect your newly single status, that’s when the divorce can affect the credit score. Most of the time, married couples have a credit card they use together. This card is typically in one of the partner’s names. The other one is an authorized user.
You protect your credit scores when you work together to pay off that account. If you don’t have the means to cover it, then there is a disruption in your current credit history.
How to Help Protect Your Credit During a Divorce?
Divorce is no walk in the park. Almost 50% of American families deal with poverty right after getting divorced. And 75% of all women who apply for welfare benefits decide to do so due to a disrupted marriage, according Investopedia.
To help protect your credit when going through this hefty ordeal, it’s imperative that you remove your name from all the accounts that your ex-spouse oversees. This helps you avoid a negative impact to your credit scores.
You should also be removing the ex-spouse from being an authorized user from your accounts to re-establish that control. Finally, it’s paramount that you watch your credit utilization rate. Routine credit monitoring can help you assess your credit history and score.
If you closed an account, then there might be a slight drop in your credit history because closing it impacts the credit utilization rate. Also, if you were a victim of fraud, then monitoring can help you keep track of everything happening with your credit.
If you don’t know where to start, then a credit monitoring service can help. They provide credit monitoring that’s tailored to your needs. So, you can obtain practical suggestions on how to help your credit or remain notified in case of fraud and theft.
How to Help Your Credit After a Divorce?
Positively impacting your credit history after a divorce is no easy feat. But it can be achieved with proper planning. First, you should start by decreasing the debts and paying the bills on time. To stay on track, you might want to live on a budget. At least for the time being.
Managing your resources and income wisely is a key factor in positively impacting your credit score. Another tip is to address the joint debts you have with your former partner. The goal is to stop them from piling up so that you can balance your income.
Lastly, try to avoid any pitfalls during the span of the divorce process. Maintaining a stable and civil relationship can help fend off a vindictive spirit. Also, don’t forget to double-check all the accounts you shared with your former spouse and clear out all the financial burdens. Doing so will keep your credit history in tip-top shape, and you won’t have to deal with unnecessary stress.