posted by Eric Schutzbank
The emotional aspect of divorce often makes it difficult to focus on the details of what needs to take place. One of the areas that is often overlooked is your credit rating. How can you protect yourself? Consider three tips.
1. Take inventory. Pull your credit report to get an idea of everything that is out there. Be aware that some lines of credit may not be reported to a credit bureau. For example, you may have a credit account with your dentist office or other private service provider. Look through past records to try to identify any creditor you may have overlooked that is not on your credit report. You should also find out if your spouse has credit accounts with a private service provider that may be considered marital debt.
2. Remove your spouse as an authorized user. Your credit report will note who is an authorized user on an account. Leaving your spouse as an authorized user can be dangerous if your spouse has a poor spending history. It gives them the authority to charge, but not the primary responsibility for the debt with respect to the concerns of the credit provider. You usually can have them removed by simply calling the credit card company. Additionally, it’s just as important for you to be removed as an authorized user on your spouse’s accounts. If your spouse does not pay, that unsettled debt can be reflected on your credit report and you can potentially be liable for it. If a divorce action has been initiated or you are otherwise in negotiations with your spouse for an amicable settlement, you should NOT take this action without your spouse’s consent or a Court Order. This could be deemed a violation of any automatic financial restrictions that take effect upon the filing of divorce in most states. It could also have a negative effect on negotiations if the step is taken unilaterally and not by agreement. If your spouse refuses to do it, you can call the credit card company yourself. If they will not allow you to remove yourself, you may want to contact the credit reporting agency and dispute their including it on your credit report. You should never take this step without consulting with your domestic relations attorney.
3. Separate joint accounts and liabilities. This can be more difficult and often cannot be done until a final settlement is reached. The details of separating joint accounts will vary depending on the divorce settlement. For example, the person who stays in the house may be responsible for paying the mortgage. If this is the case, it would be best to refinance into the responsible person’s name. If it’s not possible to separate a joint account, add conditions to your divorce settlement to protect yourself. For example, if your spouse is going to miss a payment, they must notify you in advance. It’s not fair for you to make the payment, but doing so will protect your credit. Keep track of those instances so you can recover the funds in court at a later time. Ask the lender to send a copy of the statement to both of you, so you can keep track of any delinquencies.
Lastly, be sure to protect yourself from yourself. It’s not uncommon to incur a lot of credit card debt when transitioning from married life to single life. It’s difficult for individuals to adjust to the restrictions of just one income. Have a realistic post-divorce budget and stick to it.
