Divorce and your credit report

If you’re going through a divorce, or are contemplating one, you may want to handle all issues concerning credit. A divorce is a painful experience and can be expensive in areas concerning credit. Even after the divorce has taken place, an ex-spouse can leave a blemish on a credit report. Former spouses who fail to pay off debts will invariably hurt their ex-partner’s credit histories on joint accounts and end up giving negative credit on a credit report. The best way to maintain a credit report with no credit defaults or other inaccuracies is by contacting all your creditors and informing them about your divorce. The fastest way to overcome potential pitfalls is by understanding the different types of credit accounts opened during the marriage.

There are essentially two types of credit accounts, namely joint and individual credit accounts. When applying for credit, you have to opt for either an individual or a joint account. For both the accounts, you can authorize select persons to use them. In the case of an individual account, the creditor will consider your income, financial assets and credit history after which the account will then appear on a credit report. You alone are entirely responsible for paying off debts. It may be difficult for you to paint a strong financial picture without your spouse’s income, if you’re unemployed or work part time or have a low paying job. But, by opening an account in your name, you are solely responsible and can maintain a clear credit report with no credit default entries.

If you sign up for a joint account, the creditor will consider you and your spouse’s income, assets and credit history. Regardless of who is the main bread earner, you and your spouse are equally responsible for paying off debts and dues. When reporting the credit history of a joint account to the credit bureaus, a creditor must include both the names. A creditor who is granting a loan will usually favor an application that has the combined financial resources of two people. A creditor can convert a joint account into an individual account. A creditor can also close the account due to a change in marital status, if requested by either spouse.

The creditor requires refinancing to remove a spouse from the obligation, in the case of a mortgage or a loan. In the event of a divorce, it is advisable to close former joint accounts or accounts in which your ex-spouse was an authorized user. You and your spouse should get a copy of your credit report to verify that the information there is correct. If accounts are separated immediately after the divorce, it will become easier for you to maintain a clear credit report with no credit default entries.