Divorce can have a big impact on your finances. From asset and debt division to spousal and child support, divorce can have a lasting impact on your finances. But what about your credit?
It’s important to understand how your divorce may affect your credit so that you may take precautions to better safeguard against it.
Key Points
- A divorce itself will not impact your credit health. However, it may indirectly affect your credit based on how your debts are handled during the divorce.
- A divorce may affect your credit if you hold joint accounts with your ex-spouse that are not handled responsibly.
- A divorce decree may determine who assumes responsibility for joint debt if you split with your spouse.
- It’s wise to close joint accounts or remove your name or your ex-spouse’s name from any joint account to minimize the odds of having your credit score negatively affected.
Will Getting A Divorce Affect My Credit Score?
The answer to this question depends on the state of your finances before and after you divorce, among other things. Fortunately, your marital status is not part of your credit. Having said that, certain factors from your divorce may have indirect effects on your credit, such as the following:
- Whether you have joint debt with your ex-spouse
- Whether your name is on a loan agreement that you took out with your ex-spouse
- Total debt shared with your ex-spouse
- Any subsequent reduction in household income after getting married
How Joint Debts May Affect Your Credit During A Divorce
Remember that debt in your name is your responsibility. This includes joint accounts that include both you and your ex-spouse. In the eyes of your creditors, you’re responsible for making sure that any debt payments are made on time every billing cycle.
If you’re authorized on a joint account that the judge has assigned to your ex, it’s important to ensure that they are making their payments responsibly. Keep tabs on your ex-spouse’s payments and how they are using the account, as it will affect you too. If your ex misses any payments, it would be in your best interests to cover those payments in order to protect your credit.
Will Joint Accounts Appear On Your Credit Report After A Divorce?
Joint accounts will still appear on your credit report even after you divorce. So, if your name is on these accounts, you should handle them accordingly before the divorce is finalized.
If joint accounts are not settled with lenders, this can pose a problem if the person responsible for making payments does not do so. In other words, if your name is still on a joint account with your ex-spouse who fails to make payments, you could still be on the hook. Any late payments will appear on both of your credit reports and can negatively affect your credit scores.
For this reason, it’s important to take measures to protect your credit in the event of a divorce.
This typically means completely removing one person from the account or closing it altogether.
- Closing the joint account — If your joint account is debt-free, you should be able to close it, as long as your ex-spouse agrees. However, if there’s still money to be repaid, you’ll need to either need to pay it off first or refinance it.
- Removing your name from the joint account — Taking your name off the joint loan account can be a more complex process, especially if there is still debt remaining. In this case, your ex-spouse will need to agree to assume full responsibility for the account. The lender may also want to assess the remaining person’s creditworthiness before agreeing to allow your name to come off the loan agreement.
Who Determines Who Is Responsible for Joint Debts During A Divorce?
Generally speaking, a divorce decree will be issued by a judge in order to determine who will be responsible for settling the loan or making the payments to pay it off in full.
A divorce decree can give your ex-spouse responsibility for making payments on a joint account. However, this doesn’t mean that you would no longer be liable in the eyes of your creditors. If your name remains on the joint account, any missed or late payments reported to credit bureaus could still negatively affect your credit score.
How Divorce Can Affect Income And Credit?
Divorce can put a major strain on your income as you go from being a two-income household to a single-income household. With your income reduced and your expenses like rent no longer split, keeping up with your debts and daily expenses can be difficult.
In this case, it may be more difficult to cover your monthly bills, which may put you at greater risk of falling short on bill payments. Should you miss a bill payment, your credit score could suffer.
Tips On Managing Your Credit And Finances During A Divorce
The best way to avoid the financial stress that comes with divorce is to cut down on expenses and/or increase your income level.
Cut Down Expenses
There will be many things that will naturally be cut down on when there is one less person living in a home, such as groceries. But there are still bills to pay. Be sure to prioritize all of your expenses and dedicate yourself to creating and sticking to a budget to help reduce the financial pressure that you may experience.
Increase Income
You might also want to see what you can do about increasing your household income, whether it’s getting a side job or taking steps to get promoted at work. With more money coming in, you’ll be in a better financial position to adequately cover all pressing bills and expenses while protecting your credit.
Keeping Tabs On Your Credit
It’s up to you to stay on top of your credit. The best way to keep track of your credit score is by regularly checking your credit report and score. Thankfully, multiple services offer free credit checks in Canada.
| Cost | Credit Score | Credit Report | ||
 | Free | Yes | Yes | Visit Site |
 | Free | Yes | Yes | Visit Site |
 | Free | Yes | Yes | - |
Final Thoughts
Simply filing for divorce shouldn’t have a direct impact on your credit score. However, if joint accounts are mismanaged during the process, it’s possible that you may see an effect on your credit. The best way to combat this is to make sure all credit account payments are made on time and do what you can to separate all your finances from your ex-spouse, including on joint accounts.
