A divorce can upend normal life in many ways, including your finances. While a change in marital status won’t impact your credit, any change in the amount of debt you have or how often you make payments actually can.
If your credit scores have taken a hit with the dissolution of your marriage, here’s how to ensure your credit remains intact after a divorce.
Does Getting Divorced Ruin Your Credit?
Life realities such as marital status don’t have a direct relation to the rise or fall of your scores, but the actions that happen as a result of a divorce can have an impact.
While there’s not a specific divorce credit score, you can see a credit score drop after you divorce if you have joint debt that you or your former spouse default on.
The best way to prevent your former spouse’s actions from impacting your credit is to separate all joint debt prior to the divorce. Then, once specific debt is in your name alone, you’re in control of your credit by ensuring the payments are made on time, every time.
What Happens to Your Credit After a Divorce?
Once the divorce is finalized, any debt in your name stays in your name unless you take steps to remove it.
For example, if you want to close a joint credit card, you’ll first need to pay off the balance and redeem any card-related rewards. Then contact the card issuer and request the account be closed. Stay on top of things and watch for an email or letter confirming the request has been made.
While closing a long-held account that’s in good standing can impact your credit scores in terms of credit age and credit utilization ratio, the impact will only be temporary as long as you continue with positive credit activity going forward.
New Name, New Credit
If you’re going to change your name after a divorce, make it easy on yourself and do so before you apply for new credit. Since your credit reports are tied to your Social Security number and not your name, any variations of your name will be listed on your credit reports.
To change your name, contact the Social Security Administration by mail or visit a local branch in person, and then also have it changed on your driver’s license.
Start Focusing on Your Credit
Once the divorce is in the past, it’s time to refocus your energy on your finances. There are a few easy ways after divorce.
- Pay Your Bills: Getting behind on bills can be destructive to your credit. While missing certain bill payments (your smartphone, for example) won’t do immediate damage, if an account goes into collections, the impact can be severe to your credit scores — and a derogatory mark will stay on your report for up to seven years. Create a budget and stick to it so you can cover your essentials each and every month.
- Open a New Account: If you need to establish credit in your name, or increase the amount of credit you currently have, consider applying for a new credit card or loan. When applying for a loan, make sure the amount is one you can manage paying back every month.
- Never Miss a Payment: Make your payments on time, every time. No matter what.
- Watch Spending: Once you’re approved for a new credit card, watch your spending. Lenders like to see a credit utilization of 30% or lower, with 10% being ideal.
Life post-divorce can feel bumpy, so have a plan to take care of yourself and your finances. Take time to review your reports and scores, learn what affects it, and your smart financial decisions will benefit you for many years to come.