I Give You Credit.
Did you know that divorce may effect your credit score?* The change of marital status is not itself the reason but rather due to the Parties’ behavior. Some acts which are generally known to cause a negative effect:
1. One of the parties defaults on joint debt. While sometimes it’s purposeful or vindictive, payments could also just be overlooked (especially during an emotionally overwheling divorce process). While many Separation Agreements and the following orders include a division of marital debt, the language establishes an expectation amongst the parties but may not actually protect any claims from a creditor.
2. Closing joint credit accounts can have a negative effect on one of the parties ability to access credit. As it’s historically been said, many people are just one emergency away from a financial disaster that will wipe out their checking or savings. Given the current inflation, it is likely that many people do not even have that rainy day, emergency fund, making access to credit all that more important.
3. Removing an authorized user can be deterimental to the person who does not already have an established history of individual credit. Prior to closing accounts, the parties should discuss whether one of them should keep that account.
How can one best protect themselves? The answer is simple: parties should communicate and to treat one another with respect.
*Please note that we are definitely not experts in credit; however, the above-information is a general collection of what we’ve heard from our clients over the years. We’re happy to connect you with someone who can provide more specific information and planning.
Faye & John