Can Divorce Impact my Credit Score?

Does getting a divorce impact your credit score? The short answer is, not directly, but possibly indirectly.

No Direct Impact

There is no direct impact on your credit score when you finalize a divorce, because the credit reporting agencies do not consider marital status as a factor in determining your creditworthiness. That being said, there are indirect effects from the divorce that may have an impact on your credit score.

Former Spouse Fails to Pay Joint Bills

Did you fail to separate all of the finances in the divorce? If so, you might still have joint bills in both your name and your former spouse’s name, and some of these might be your ex-spouse’s responsibility. If this is the case, you’d better hope he or she pays those bills. If they don’t, this will negatively impact your credit score – unless you decide to pay them yourself. The bottom line here is that the financial institutions don’t care who was told by the judge to pay these bills. If both names are on them and they aren’t paid, both people will see their credit score suffer.

Refinancing the Home

Have you decided to keep the family home in the divorce instead of selling it and splitting the funds? If so, you might have to refinance the home to get a mortgage with just your name on it. This can add a lot of debt to your name and to your financial record, which could impact your credit score. This is one reason many divorcing couples sell the family home and split the funds from the sale.

Dropping Down to One Income

Did both you and your spouse have jobs while married? If so, the drop to one income from two after the divorce is finalized might impact your credit. The biggest impact will be when you try to apply for a new credit card, a financing plan, or an auto loan. Your income might not be enough to successfully acquire one or more of these accounts.

Access to Accounts Remains

Does your former spouse still have access to your bank accounts or other financial accounts? If so, this can impact your credit score immensely. This is especially true when couples keep joint credit card accounts after they’ve separated or divorced. Both people named on the account will be responsible for the amounts that are charged. If those bills aren’t paid, your credit score will take a hit.

Decrease in Credit Limits

Many credit companies will check in on their customers every so often and review their financial records. The credit agreement might state that the credit company can change the limits on the account if they deem necessary. If your former spouse was making more money than you, and the credit company reviews your situation after the divorce, the company could decide to lower your credit limit because your income is now substantially less.

One Spouse Fails to Pay Their Share

Depending on the divorce decree, your former spouse might be required to pay for some of the shared liabilities from the marriage. If this is the case, your spouse will need to make these payments. If he or she fails to pay their share from the divorce decree, it can significantly hurt your credit score. This most often happens when there is property that is owned jointly, like the family home, or any other property.

Taking Control of Your Finances after a Divorce

Following a divorce, the state of your finances will be largely determined by whether or not you retain the assets you are entitled to. Florida law requires a fair distribution of property between the spouses, but fair is in the eye of the beholder.

Fair and equitable does not necessarily mean you will walk away with 50% of everything.  Many factors determine how assets will be divided including each spouses’ contribution to the marriage, some of which may not be financial in nature. 

It is always advisable that the couple decide together how to divide assets. Otherwise, a judge might not give either spouse what they believe is fair.

Settlement Agreements in a Florida Divorce

Taking control of your finances after a divorce may start with a settlement agreement. In this case, both sides should resolve all outstanding financial issues and you will likely want to separate finances as soon as the divorce is final, if not before. 

Some outstanding issues to resolve with regards to your finances include:

• Your Home – Unless one person is staying in the home, it may need to be sold. Repairs, painting, yardwork, all that needs to be done prior to a sale should be considered to get top dollar
• Your Debts – How will you divide what you owe should be a priority in this new reality. This is where mediation may help
• Businesses – If a business is owned by the couple, for example, but it is difficult to divide, the other spouse may instead receive property
• New Bank accounts – Check with a CPA and insurance broker. You may want to open a new checking and savings account if you had joint accounts previously. Your retirement account should name only you now
• Credit Cards – Any credit cards should be in your name only unless you prepared ahead for your spouse to pay the bill
• Your Will – Update your insurance policies and your will. Make sure you change beneficiaries 
• Your Budget – Adjust your budget to the new reality of child support payments, rent or mortgage, food, auto expenses, insurance payments, everything will need to be adjusted with a new budget. Do not assume you can live the same way you did before. You may discover you can save money by cutting back on non-essentials and finding ways to pay less for your cellphone, cable, and credit card. 

After the divorce, you need to check your credit score regularly and even sign up for an alert if the score changes so you can rebuild your credit. Request a credit report, so you know where you stand. If there is a mistake on the report, alert the agency in writing.

Contact an Experienced Divorce Attorney Today

Are you ready to file for divorce in Pensacola, Florida? If so, it’s time to contact an experienced divorce attorney about your situation. Call the office of Crystal Collins Spencer at 850-912-8080 to schedule an appointment today. Divorce is complicated. Making sure your soon-to-be former spouse doesn’t have access to your finances is important. Our attorney can help ensure that your finances are protected in divorce.