Divorce or a breakup with a live-in partner can be one of the most vulnerable times in life — including when it comes to your credit score and online identity. Divorce can indirectly impact your credit depending on your financial circumstances.
Here are some ways to rebuild credit or protect your finances during and after divorce:
- Know your credit score and numbers
- Understand how debt is divided in divorce
- Open new accounts in your name
- Get rid of shared accounts
- Contact your lenders
- Stay diligent about your finances
See if you qualify for credit repair:
1. Know your credit score and numbers
If you don’t already know it, get clear about your credit score and report. Pull your credit history right away.
Understand which accounts are in your name, which are in your partner’s, and how much is owed. You may discover accounts you did not know about.
You may also get a wake-up call about how involved you actually were (or were not) in the family finances.
Experian Boost offers a free credit score, as well as the ability to boost your score immediately by as much as 18 points by considering your utility bill payment history.
2. Understand how debt is divided in divorce
Talk to a lawyer or otherwise research how property, assets and debts are divided in a breakup or divorce in your state. You may be legally protected from credit card, medical debt, student loans and other debt your partner took on — or maybe you are legally responsible. An attorney can help you find out.
Jay Mota, a certified financial planner (CFP) and certified divorce financial analyst (CDFA) based in New York City, says most states are equitable distribution states, which means property/debt is fairly but not equally distributed. There are 9 states, however, that are community property states, where all property/debt is divided equally:
- New Mexico
“In most cases, if the debt is joint marital debt or if the debt is under one spouse’s name but accrued during the marriage and used for marital purposes, then the debt can be considered marital,” Mota says.
Loans obtained before or after the marriage are typically considered the borrower’s responsibility.
“It is important to note that no matter what the resolution is with your divorce, creditors do not care,” Mota says. “If you are not responsible for the debt by way of divorce settlement, you are still responsible for the debt to the creditor.”
In other words, if your name is attached to the debt and your ex does not pay it, you could be held financially liable.
Mota advises his clients to answer the 4-W’s and H to figure out if they'll be liable for debt in divorce:
- Who – took out the line of credit?
- What – is the type of credit?
- When – was the credit started?
- Why – was the credit obtained?
- How – has the debt been paid during the marriage?
He says knowing this information will allow you to chart out what will be and will not be your responsibility during and post-divorce.
3. Open new accounts in your name
If you don’t already have a checking account and credit card that are in your name, and your name only, go to your local bank branch and do that today.
Deposit paychecks into these accounts, and start charging on the new card — as well as paying it monthly before the due date (set up auto payments to make this easy).
This builds credit fast if you have none, or can quickly improve your score if it is low.
4. Get rid of shared accounts
Close joint accounts. Also, remove your ex from any of your accounts for which he or she is an authorized user, and ask your name be removed from their accounts if you are an authorized user there.
If both your names are on a checking or savings account, then both of you can take out all the money.
Likewise, if you share a credit card, line of credit (like a home equity loan) or personal loan, your partner can max out the debt without your approval, and you could be legally responsible for it.
Also, if your partner promises to make timely payments, but does not, that could affect your credit score as well.
A secured credit card is a good way to get a credit card if you have a low credit score, or no credit history. A secured credit card requires you put down a cash deposit, then you can charge against that sum.
5. Contact your lenders
For accounts on which both you and your partners’ name appear, officially notify lenders, banks and credit cards of your divorce.
Send a certified letter with a copy of the divorce decree, ask that they provide a current account statement and tell them that you do not intend to be held liable for any debt accumulated after the date of the letter.
Request the account be put on inactive status so no new additional charges may be added, and that once the balance is paid in full, the account is to be closed completely.
6. Stay diligent about your finances
One of the most common-sense — and also tedious ways — to protect your credit — is to stay on top of all finances like a hawk.
Pay bills on time
Regardless of what your soon-to-be ex-promises, or what a separation or divorce decree requires, take responsibility for paying bills on time each month. Your credit score will be affected if they are not paying on time, and that will cost you.
Get all statements sent directly to you each month. Open them all.
Set up automatic payments
You’re managing a lot. Don’t forget to pay your bills. Set up automatic payments so you don’t have to remember to pay on time.
Create a budget
Set up a budget that you can stick to, easily. Keep track of spending habits and what you earn or could earn, and focus on saving.
Create a financial plan for both the short and long term
While you may need to repay debt and build a savings cushion now, set your sights on big goals, too. This can include starting a business, going back to school, buying a house or condo, and investing for retirement.
FAQs about credit and divorce
Have more questions about improving your credit after divorce? Get answers to other frequently asked questions:
How does divorce affect credit?
Divorce does not directly affect your credit. However, the cost of attorneys, affording two homes instead of one, and other expenses related to the divorce or separation process often set back people financially — which can lead to debt and credit problems.
Your marital status is not listed on your credit report. However, nearly 100% of the time, divorce does trigger dramatic changes in each spouse's financial pictures, which can affect your credit.
Further, because couples' finances are so intertwined, one spouse's poor credit can impact the other's if precautionary steps are not taken. For example, if you shared joint credit accounts or your ex’s name is still on an active account, your score could be affected.
Why is it so important to make your credit score a priority if you’re going to divorce?
Divorce is usually very stressful, and even if you are glad to be splitting up, there are a lot of details they have to be taken care of. This means that it’s easy for bills to slip through the cracks. One late payment can cause an otherwise excellent credit score to drop by 50, 75 points or more, it is important to try to make sure that bills are paid on time.
In addition, after divorce you will often need good credit to rent or buy a new place to live or get utility services without a deposit. You may decide to hunt for a better paying job or start a small business, both of which may involve credit checks. And let's face it: if your credit does take a nosedive, it's not going to be fun having the reminder of that time in your life coming back to haunt you several years later when you’re filling out applications for credit.
Credit scores are one of the most critical pieces of recovering financially from a divorce. Credit scores are also one of the most overlooked pieces post-divorce, as I've found by communicating with thousands of my dear blog readers.
Does your spouse’s debt become yours after divorce?
If you live in a community property state, where assets and debts are divided equally, your spouse’s debt accumulated during the marriage is likely to become half yours. In other states, how much of your partner’s debt you take on, if any, will be determined by the court. That is, unless you agree on how to divide things on your own or work with a mediator.
How many years does it take to rebuild credit?
According to credit bureau Experian1, most negative marks can stay on your credit report for seven to 10 years. Mota says there are multiple factors that determine how long it will take to rebuild a low credit score.
Experian provides these examples for how long different negative marks can affect your score:
- Late and missed payments: 7 years
- Collection accounts: 7 years
- Chapter 13 bankruptcy: 7 years
- Chapter 7 bankruptcy: 10 years
- Credit inquiries: 2 years
How do I rebuild my credit after divorce?
It is possible to rebuild bad credit after divorce. The rules for credit repair are the same, except that after divorce, make sure that you keep an eye on your credit score and report to ensure that your ex does not steal your identity and accrue debt in your name. Remember, here are some other ways to rebuild your credit:
- Maintain your own accounts and open your own bank account if you don’t already have one
- Focus on living within your means
- Build your income
- Remove your ex from any joint credit cards or other accounts
- “How Long Does It Take to Rebuild Credit?” August 27, 2020. Experian. https://www.experian.com/blogs/ask-experian/how-long-does-it-take-to-rebuild-credit/
The act of divorce does not hurt your credit. However, the cost of attorneys, affording two homes instead of one, and other expenses related to the divorce or separation process often set back people financially.
Technically, divorce does not trigger anything on your credit score, history or report. However, nearly 100% of the time, divorce does trigger dramatic changes in each spouse's financial pictures, which can affect your credit.