Divorce, Debt and Credit

Highlights:

• Filing for divorce and divorce proceedings will not impact credit reports or credit scores
• Understand your divorce decree
• If joint credit accounts are not paid as agreed, your credit reports and credit scores may be impacted

Dissolving a marriage is never easy – for many reasons, including unraveling your finances and debts. And you may be wondering if a divorce affects your credit reports and credit scores.

First, filing for divorce – or the actual divorce proceedings – will not impact credit reports or credit scores. If you and your former spouse have kept separate finances, you’re likely to see no direct impact on them either. But, if the two of you continue to hold joint credit accounts (such as credit card or mortgage accounts) and those accounts are not paid as agreed, your credit scores and credit reports could be negatively impacted.

Understand your divorce decree.  A divorce decree may give your former spouse responsibility for a joint account, but that doesn’t let you off the hook where lenders or creditors are concerned. If your name remains on the account, missed or late payments reported to credit bureaus may impact your credit reports and credit scores. 

Similarly, if you are an authorized user on a credit account or a cosigner on a loan with your former spouse, consider calling the lender or creditor to find out what options you may have. If you are the primary account holder, it may be possible to convert the account to an individual account, depending on the lender’s policies. Converting it to an individual account will place the account -- and the payment responsibility -- in your name.

Determine if your state follows community property or equitable distribution rules.  In community property states, property – and debts – acquired during the marriage are owned equally by both spouses. That means if you live in a community property state, you and your spouse may both be responsible for any debt you incurred while you were married. See more about community property states on the Internal Revenue Service website.

In equitable distribution states, property – and debts – acquired during the marriage should be divided fairly, but not necessarily equally. 

Consider the impact of missed child support payments.  If you are behind in child support payments, this information could be included on your credit reports and may impact credit scores. Unpaid child support, like any negative account, may remain on your credit report for up to seven years. 

During the divorce process, check your credit reports with all three nationwide credit bureaus. This allows you to identify joint or shared accounts or debts you may need to address. You’re entitled to a free copy of your credit reports every 12 months from each of the three nationwide credit bureaus by visiting www.annualcreditreport.com. You can also create a myEquifax account to get six free Equifax credit reports each year. In addition, you can click “Get my free credit score” on your myEquifax dashboard to enroll in Equifax Core Credit™ for a free monthly Equifax credit report and a free monthly VantageScore® 3.0 credit score, based on Equifax data. A VantageScore is one of many types of credit scores.

Keep in mind your credit limit on credit cards may decrease. If you’re an authorized user on a credit card account or a joint credit card account holder and your income changes -- for instance, if one person is removed from the account, leaving only your income -- your credit limits may be impacted if a creditor reviews the account. That could affect your debt to credit utilization ratio – the amount of credit you’re using compared to the total amount available to you. This ratio is one factor that impacts credit scores.