If you’re considering a divorce, you may have heard that it will ruin your credit rating. Is that true?
It really depends on your situation. There is no official credit penalty for getting divorced, but there are divorce-related issues that can have an impact on your credit.
New debts from an angry ex
The first issue may occur in the period leading up to the divorce. Unfortunately, some aggrieved spouses try to take advantage of joint accounts by signing credit authorizations and running up new debt. In a worst-case scenario, you could end up with thousands of dollars in new joint debt.
This is one reason not to wait to file for divorce. Once you have filed, your lawyer can ask the court for a preliminary injunction to prevent your ex from spending down your accounts, taking out new debt or making other destructive financial moves.
These moves can often be undone as part of the divorce process, but, in the meantime, your credit could take a hit.
The cost of divorcing
The reality is that getting a divorce costs money. There are ways to reduce the cost, such as negotiating an agreement with your divorcing spouse about all of the issues related to your separation and divorce. If you can divide your property and debt, make arrangements for child custody and parenting time, and agree on support issues, you will save a great deal of time, energy and, yes, money. If that is not possible, you can expect to spend more.
If you are in a tough financial situation, talk to your divorce attorney. In some circumstances, it may be possible to have your ex cover some of your divorce-related costs and attorney fees. Your attorney can help you make choices that will keep the costs down.
You may end up with divorce-related debt. If you do, it could negatively impact your credit score — especially if you pay your attorney fees on a credit card.
The domino effect
If you end up with some divorce-related debt, it could make it harder to pay your other bills on time. If this happens, it could affect your credit score. Do your best to maintain regular payments even if you have to pinch pennies.
You and your spouse are still responsible for paying your mortgage, utilities, car payments, credit card accounts and the like during the divorce process, but it isn’t always clear who will be paying what.
Working with your attorney, make a plan for which spouse will be responsible for which bills. Get it in writing so your lawyer can get a court order.