Divorce and Credit-don’t let it ruin your credit!

After evaluating credit for over 20 years it is clear that divorce and credit usually equal low scores.  Having separate credit accounts, credit cards, car loans and leases, student loans, mortgages, and lines of credit are the smartest course of action when you are married.  Unfortunately having separate mortgages is usually impossible since most people need both incomes to be approved for a mortgage. 

 When a divorce is pending many Attorneys advise their clients to stop paying all credit when there are joint accounts.  This will destroy both consumers credit and scores.  One new late payment can bring a credit score down 100 points so you can imagine what many would do.  Whether you are a joint card holder or an authorized user your score will be affected if there are late payments on the credit profile. 

 If each individual is already the sole responsible party for their credit, if they decide to have new late payments, it can only hurt them.  Even if a spouse pays the wife or husbands credit card bills they do not have to be a joint credit card holder.   

 The other problem we find is many divorce Attorneys do not protect their clients in regards to mortgages.  If an individual decides to sign the deed, for their home, over to their spouse but they do not refinance the mortgage out of their name what good is it?    10 years down the road the homeowner defaults on the mortgage and the ex-husband or wife who hasn’t owned the home in 10 years is still legally responsible for the mortgage.  Since the mortgage is still in their name it will show up as a negative account and ruin the individuals credit as well.   If the divorce decree states that the spouse, who is keeping the home, has a certain amount of time (let us say 12 months) after the divorce to refinance the loan into their name solely.  What happens if they don’t refinance the mortgage within that 12 months, lose their job, and default on the payments? This was a recent situation we came across.  The individual wanted to buy a home and couldn’t get a mortgage because of the scores dropping from the late payments on a mortgage she was not supposed to be responsible for.  The loan should be refinanced before the divorce is granted if an individual is to be protected correctly. 

 ”Great credit brings great opportunity”

 



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