What Does Divorce Do to Your Credit?

Posted on May 17, 2018 11:17am
What Does Divorce Do to Your Credit?

Getting divorced does not harm your credit directly, but the financial issues that come with divorce can certainly harm your credit score. Your credit score is based on several different aspects of your financial standing. If something drastic happens to your finances, like a divorce, your credit will likely be impacted in some way.

Dealing with Increased Expenses

Divorce can be expensive. Not only can legal fees add up; dividing your life from that of your spouse’s can be quite costly. For example, leaving the home you shared to find your own living space can raise your monthly expenses. If you were once living on a joint income, you now have only your own income to rely on. If your spouse was the sole breadwinner, your financial folder will likely take a substantial hit once the divorce process begins.

Also, if you have children you might also face some other costly expenses. From extracurricular activities to sudden dental expenses or trips to the doctor, these costs can add up quickly under normal circumstances, but can be very difficult in a divorce.

Any accounts or bills in your name that go unpaid will affect your credit score, whether it is your responsibility to pay them or not. You can reduce this risk by eliminating joint accounts and making sure anything with your name (and by association, your credit score) attached is paid in a timely manner.

Borrowed Money

If your well is running dry during a divorce, you might borrow money or put some expenses on credit cards to get by. This can be very dangerous, because it would raise your debt to income ratio, potentially setting it off-balance and harming your credit score. If you already had credit card debt before your divorce, this could become an even bigger problem when bills start stacking up.

How Bad Credit Could Affect You

What’s so bad about a poor credit score anyways? While it may not seem like a very big deal now, a bad credit score can haunt you for years to come and could prevent you from very important, big purchases. Buying a car, qualifying for a loan, or purchasing a house can all become exponentially more difficult when you have a low credit score. Low credit scores tell lenders that you have more debt than income, or perhaps that you have had difficulty making payments in the past. Whatever the reason, a low credit score doesn’t look good.

What You Can Do

To maintain good credit and protect yourself from the hardships of divorce, it is important to make a financial plan. Budget your necessary expenses and look over what you can cut out. If you think your spouse may ask you to pay alimony, consider how that could impact your finances and tell your lawyer of your concerns. Likewise, if you plan to ask for spousal support, express your need to your lawyer and determine what you think you need. However, do not factor spousal support or child support into your budget. It is always best to protect yourself in the event that your spouse does not pay, that way you aren’t left without a rent check or car payment.

Knowing Your Credit Score

One of the most important steps to protecting your credit is knowing your credit score at all times. There are several free services online that can help you track your credit score without putting any hard inquiries on your record. These services can help you monitor or track any changes, that way if something changes, you will know when and why. Also, if you have a high credit score before the divorce, it is likely you will take a more substantial hit that the person with an “okay” score. Unfortunately, it is usually true that those with more have more to lose. In order to stay ahead of this, monitor your score at all times, taking note of any declines and be proactive about finding improvement.

In short, when it comes to divorce, it’s important that you be prepared for the financial effects. Remember to plan for any upcoming expenses and make sure you do what you can to control and consolidate your debt to avoid the difficult repercussions, like bad credit.

If you need help with your divorce, contact McKinley Irvin in Oregon for legal help.
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