How does divorce affect your credit?

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

A divorce can be one of the most challenging life events you go through. Sadly, it can have a far-reaching impact on your family, social life and finances. Many people worry about how their divorce will affect their financial situation. Throughout the marriage, you and your partner likely both invested in and acquired assets that you must now divide, which can be difficult. 

On top of the fact that divorce can be expensive, there’s also the question of how divorce will impact your credit. Divorce on its own won’t directly affect your credit, but it can indirectly have an effect in several ways.  

Joint accounts can affect your credit after a divorce

A joint account is a bank account, credit card or loan shared by two or more people. These accounts are commonly used by couples, family members and business partners. Everyone who’s on the joint account usually has access to the account and all its functionality, including the ability to deposit, withdraw, make purchases and make changes within the account. Because of this, joint accounts are considered during a divorce.

One partner in the divorce may be granted ownership of an account. Getting a divorce doesn’t automatically notify the bank to update the account—you’ll have to do this independently. It’s highly recommended that you remove your ex-spouse from an account post-divorce or close the account and open a new one under just your name. 

Make sure to note that joint accounts from when you were married will still show up on your credit report. There’s a risk your ex-spouse might not make payments you determined they were responsible for (as per the divorce decree), which can affect both your credit and theirs. In fact, if your name remains on the account and debts go unpaid, you’ll be legally responsible for payments and creditors can even come after you. Protect your credit post-divorce by closing all joint accounts or actively getting your name removed from those accounts.

Other ways divorce can affect credit

Your credit score is made up of five main credit factors: 

• Payment history (35 percent)
• Amounts owed (30 percent )
• Credit history length (15 percent )
• Credit mix (10 percent )
• New credit (10 percent )

So anything that can impact one of these factors can affect your credit report and score. With that in mind, here are a handful of other ways divorce can indirectly affect your credit: 

1. Decreased income

Decreased income won’t directly impact your credit, but it can affect it. If you weren’t the primary breadwinner, you’ll likely feel the impact of having a decreased income. You may have become accustomed to a certain lifestyle and now have to adapt to living on a lower budget.

It’s important that you plan for this decrease in income. Even in the divorce proceedings, you’ll want to be realistic about how your new income level will impact you. For example, if you’re fighting to keep the house but won’t be able to handle the mortgage payments on your own, it might be better to suggest selling the house instead. 

Create a budget for your new income level and find ways to reduce costs. You don’t want to incur debt—that could potentially hurt your credit—while adjusting to your new lifestyle. 

2. Decreased available credit

You might see new struggles when you apply for new credit or products. Previously, you might have had your spouse’s higher income or the dual income to rely on when applying for credit cards, mortgages, car loans, personal loans and so on. Now, you may find that with just your income, you don’t get approvals as easily or can’t secure better rates on new financial products. Or, you may be approved but at significantly lower credit amounts. 

In this case, you may find that your decreased available credit amount now raises your credit utilization ratio above 30 percent, which may negatively impact your score. You’ll need to focus on paying down debts, such as credit card debt, so you can better maintain healthy credit. 

3. Financial revenge

Occasionally, a vengeful spouse may try to do things that affect your finances negatively. They might lie or hide assets so that they can’t be fairly split up. Or, the spouse may pursue unfair debt distribution and lie about which debts belong to them. They may even try to stick you with the high legal fees from the divorce proceedings. 

If any of these attempts are successful, they can have substantial financial and credit consequences for you as you try to move on with your life. 

How can you protect your credit during a divorce?

Here are some practical tips for protecting your credit during a divorce:

Address joint accounts. Pay off and close any joint accounts. You don’t want to have a higher debt-to-income ratio because one of your ex-spouse’s debts is still under your name and affecting your credit. 

For accounts you can’t close, talk to your lender to work something out so that the account is only in one person’s name. Also make sure the other spouse is no longer listed as an authorized user.

Make sure certain payments are made on time for any remaining joint accounts. Your payment history will be impacted as long as you’re listed on the account. 

Set up your own accounts. If you don’t already have your own checking and savings accounts, set those up. If you need your own credit, apply and see how much you can get. 

Be wary of a spiteful ex. Try to maintain an amicable and civil split if possible, and if you can’t, you may want to freeze your credit reports so your ex can’t open new accounts in your name.

Monitor your credit. In order to watch for how your divorce is affecting your credit and minimize any damage, regularly check your credit reports. A sudden drop in your credit score can indicate something is wrong or needs to be addressed. 

Has divorce affected your credit?

If a divorce has already negatively affected your credit, the good news is that you can still take measures to recover. Your credit can always be rebuilt—it just takes knowing what to do. The consultants at Lexington Law Firm offer their services to help individuals repair their credit. We’ll review your credit report for any discrepancies, help you file disputes if necessary and teach you how to get back to an accurate credit report.

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