Maintaining Your Credit Independence in a Divorce
When you decide to file for divorce, youre likely focused on the emotional matters involved in a marriages end: your feelings, your childrens feelings, how youll tell your family and friends, etc. But its important to keep in mind the other parts of your life that will be affected by your divorce and will have a significant impact on your post-divorce life.
A recent article in Motley Fool addresses the issue of separating credit during a divorce. These days, credit scores affect everything from what rate you can get on a home loan to how high your car insurance is, which means that you cant afford to ignore the impact a divorce will have on yours.
Married couples have certain advantages in the world of credit: when applying for loans or lines of credit, they can choose between two credit scores to get the best rates possible. But they also have some disadvantages.
Shared accounts, where each spouse has "joint account holder" status, affect both partners credit scores. So, if your spouse has handled credit carelessly on a joint account, your credit score suffers as well. This can be particularly troubling during a divorce, when youre trying to figure out who owes what on debts.
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And, perhaps more importantly if youre getting ready to strike out on your own after a marriage, those without credit histories independent of their spouses may have some unpleasant surprises awaiting them when the divorce is finalized.
Sources indicate that, after six months of inactivity, credit files go dormant. That is, agencies have no credit action to report and creditors see an empty credit history. This can make it very difficult to qualify for loans, credit cards and other lines of credit. Luckily, you can prevent credit disaster by maintaining your credit autonomy during your marriage.
In fact, maintaining your individual credit report is as easy as keeping open some of your old credit accounts (like credit cards), making small purchases with them every few months and paying the bills in full. You might also want to avoid naming your spouse as a "joint account holder" on any of your lines of credit, since thats a pretty big move in the credit world.
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Joint account holders are responsible for paying all debts associated with an account - no matter who ran them up. And, if you and your spouse cant agree on who gets control of a joint account during the divorce, you could be facing a messy situation.
If youve already begun divorce proceedings, you may want to think about reestablishing your credit. If you havent kept any lines of credit open, nows the time to start. Consider asking your bank if you qualify for any credit cards and apply for one.
You may not qualify for the best rates at first (especially if your credit history is completely intertwined with your spouses), but after several months of making full, on-time payments, you should see improvement.