Defending Your Credit During Divorce

The Woodlands, TX – When a marriage ends in divorce, the lives of those involved are altered eternally. During this time of upheaval, one thing that shouldn’t have to alter is the credit status you’ve worked so hard to complete.

Sadly, for many, the experience is the exact opposite. Unfulfilled promises to pay bills, the maxing out of credit cards, and a total collapse in communication frequently lead to the annihilation of at least one spouse’s credit. Depending upon how finances are controlled, it can sometimes have a negative impact on both parties.

The excellent information is it doesn’t have to be this way. By taking a proactive approach and creating a precise plan to maintain one’s credit status, anyone can make certain that “starting over” doesn’t have to mean rebuilding credit.

The first step for anyone going through a divorce is to find copies of your credit report from the 3 most important agencies: Equifax, Experian®, and TransUnion®. It’s impossible to formulate a plan without having a complete awareness of the situation. (Once a year, you may obtain a free credit report by visiting www.AnnualCreditReport.com.)

Once you’ve gathered the details, you can begin to address what’s most essential. Create a spreadsheet, and record all of the accounts that are currently ajar. For each entry, fill in columns with the following information: creditor name, contact number, the account number, type of account (e.g. credit card, car loan, etc.), account status (e.g. current, past due), account balance, minimum monthly payment amount, and who is vested in the account (joint/individual/authorized signer).

Now that you hold this information at your fingertips, it’s time to make a plan.

There are two types of credit accounts, and each is handled differently all through a divorce. The first type is a secured account, meaning it’s attached to an asset. The most widespread secured
accounts are car loans and home mortgages. The second type is an unsecured account. These accounts are typically credit cards and charge cards, and they have no assets attached.

When it comes to a secured account, your best choice is to sell the asset. This way the loan is paid off and your name is no longer attached. The next best choice is to refinance the loan. In other words, one spouse buys out the other. This only works, however, if the purchasing spouse can qualify for a loan by themselves and can take on payments on their own. Your last decision is to keep your name on the loan. This is the most precarious option because if you’re not the one making the payment, your credit is truly vulnerable. If you choose to keep your name on the loan, make sure your name is also kept on the title. The worst case scenario is being stuck paying for something that you do not lawfully own.

In the situation of a mortgage, enlisting the aid of a qualified mortgage professional is very significant. This individual will look at your existing home loan along with the equity you’ve built up and help you to determine the best course of action.

When it comes to unsecured accounts, you will want to act swiftly. It’s important to recognize which spouse (if not both) is vested. If you are merely a signer on the account, have your name removed without delay. If you are the vested party and your spouse is a signer, have their name removed. Any joint accounts (both parties vested) that do not carry a balance should be closed right away.

If there are jointly vested accounts which carry a balance, your best option is to have them frozen. This will ensure that no future charges can be made to the accounts. When an account is frozen, however, it is frozen for both parties. If you do not have any credit cards in your name, it is recommended you obtain one before freezing all of your jointly vested accounts. By having a card in your own name, you now have the decision of transferring any joint balances into your account, guaranteeing they’ll get paid.

Ensuring payment on a debt which carries your name is paramount when it comes to preserving credit. Keep in mind that one 30-day late payment can drop your credit score as much as 75 points. It is also crucial to know that a divorce decree does not override any promise you have with a creditor. So, regardless of which spouse is demanded to pay by the judge, not doing so will affect the credit score of both parties. The point here is to not only abolish all joint accounts, but to do it without delay.

Credit Repair Thoughts: http://www.creditrepairthoughts.org

Information from various finance sources including Woodforest National Bank, Genisis Mortgage Company, etc. www.utahburden.com

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