What Can Happen to a Person’s Credit Score After a Divorce?

by Easton Motors

Going through a divorce can be a stressful and emotionally draining experience. There are many things to work through to finalize a divorce from both a personal and legal perspective. The divorcing couple should pay careful attention to finances that they need to separate as part of the divorce. As ex-spouses work through the details, it is helpful for them to understand what can happen to their credit score after a divorce.

Maintaining a good credit score is essential, especially as people start over in life after a divorce. Individuals’ credit scores can affect their ability to borrow money, increase their interest rates on loans, inflate the amount they pay for insurance premiums, among other things. Having a lower credit score can be financially costly in the long run. 

 

When a couple gets divorced, does it directly impact their individual credit scores?

No. 

Individuals with a change in marital status alone will not see a change in their credit scores. Credit reports do not indicate whether a person is single, married, or divorced. Negative impacts on credit scores after a divorce stem from the changes in the individuals’ financial situation.

 

A divorce decree is an integral component of the legal process and can, at least in part, impact what happens to a person’s credit score after a divorce

What is a divorce decree? 

A divorce decree is a legal judgment between the court and the spouses. It is a court order that outlines each spouses’ responsibilities after the judge grants the divorce. These responsibilities will involve custody of children, alimony, child support, and the division of property.

The divorce decree will also outline how any debt the married couple took on should be handled once the divorce is finalized. Often couples think about how they will divide their assets but don’t put as much thought into how to handle the debt they shared.

 

How ex-spouses handle this shared debt moving forward will determine the impact on their individual credit scores after a divorce

Let’s start by emphasizing that payment history and debt level are the two factors that can have the most significant effect on a person’s credit score. So, if people don’t have a track record of making on-time payments and/or have a large amount of debt, there is a good chance their credit score is lower than they’d want it to be. 

Unfortunately, lenders don’t acknowledge divorce decrees. Although ex-spouses may agree on how they will pay off their shared debt, lenders don’t consider these details. In their eyes, the debt is still under both parties’ names. Divorce doesn’t erase any joint accounts they had opened as a married couple from each of their credit reports. Until they pay the debt off, joint financial obligations still connect a divorced couple to one another.

 

Therefore, if an ex-spouse fails to make payments on any joint debt as mandated in the divorce decree, it will hurt each of their credit scores.

A divorce decree can state that one person is responsible for making payments on a particular loan even though it has both spouses’ names on it. If the designated person fails to do so, it will affect the credit scores of both parties. 

 

Additional charges on joint debt accounts can be detrimental to each spouse’s credit score after a divorce

Not only could repayment of joint debt be an issue, but additional charges can be as well. If there are additional charges made on a credit account originally opened under both parties’ names, in the creditor’s eyes, both would be responsible for repayment despite being divorced. 

This increase in debt level poses a problem because higher balances on credit accounts will increase individuals’ credit utilization rates, negatively affecting both parties’ credit scores. 

A person’s credit utilization rate is the amount owed as a percentage of the approved credit amount from a lender. This rate is used to calculate individual credit scores and is a factor in determining a borrower’s creditworthiness. The credit reporting agencies can calculate this rate by using the total credit that has been extended to a person across all lenders - including mortgage companies, car lenders, student loans, and credit card companies.

Ex-spouses can mitigate some of the potential adverse effects on credit scores after a divorce by working cooperatively to pay off all the outstanding debt that they accumulated as a married couple. 

 

Divorce can also lead to financial strains that can eventually result in adverse effects on a person’s credit score.

It takes some time for people to adjust to changes in their financial situation. For example, if a married couple was living off one household income, that means one person will likely have to find a job to meet individual financial obligations he/she now faces. Each party involved may also face increased expenses as costs that were once shared, such as mortgage payments or rent and utilities, will need to be covered individually. 

As divorced individuals embark on a job search or face increased living expenses, they may find it difficult to make payments on any debt they may have. Late or missing payments on loans, bills, and credit cards would negatively affect credit scores. 

 

Individuals can take steps to protect their credit scores after a divorce.

The following are steps that divorced couples can take to protect their individual credit scores:

1. If they opened any joint credit cards while they were married, those accounts should be closed.

Those with balances remaining on them will need to be frozen while the responsible party pays it off. Freezing the account will prevent any additional charges from being made to that credit card account.

2. If the divorce process is messy, freeze credit reports with all major reporting agencies if the situation allows. 

Freezing credit reports prevents additional accounts from being opened with the person’s name linked to them. This step may not be realistic for those whose new life circumstances require them to apply for car loans or find new living arrangements.

 

3. Ex-spouses should work together to unwind themselves from accounts involving ownership of an asset. 

These accounts may include mortgages or car loans. To detach yourselves from these types of accounts, consider selling the asset and using any proceeds to pay off debt from other joint accounts. 

 

4. Protect finances by opening up an individual banking account to transfer personal funds into. 

Each party should strive to separate their assets from their ex-spouse as expeditiously as possible. 

 

5. Each person should consider what life changes they need to make to pay off existing debt more quickly, particularly those accounts that they established as a married couple.

These changes may include moving to a smaller home, driving a less expensive car, eating out less, and canceling any entertainment subscriptions they can live without. Doing so could help reduce credit card bills and help them have extra money to pay off any joint debt that remains. Ultimately, it will help them disconnect from one another financially.

 

6. Divorced individuals should create a budget to help control expenses. 

A budget can help prevent them from falling deeper into debt.

 

7. If possible, each party shouldn’t rely on alimony or child support to cover their main living expenses. 

Avoiding reliance on these funds will protect them in the event their ex-spouse is unable to make these payments to you.

 

8. If one person is responsible for paying off a joint account, he/she should try to get the outstanding balance under his/her name only. 

This can be done by refinancing loans and transferring credit card balances to another credit card - both of which would be in the responsible party’s name. By doing so, people can boost their credit score with on-time payments and further disconnect themselves financially from their ex-spouse.

 

9. For those joint debt accounts that one party is paying down, the other should be diligent and check to make sure he/she is making the payments. 

Neither individual should assume the other party is making timely payments on these joint accounts because if the person isn’t, it will negatively impact both party’s credit scores. 



At Easton Motors, we understand how divorce can be a stressful stage in a person’s life. We also know how important it is to protect and build your credit score after a divorce. If you are going through a divorce and in the market for a “new to you” vehicle, we are here to help.


Contact one of our finance experts, and we will walk you through each step of the process to get you in driving and on your way to strengthening your credit score.

Easton Motors EZ Credit Used Car Blog

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