Divorce, Debt and Credit

Highlights:

• Divorce will not impact credit reports or credit scores.
• If joint credit accounts are not paid as agreed, it may impact your credit reports and credit scores.
• In some states, both spouses own property and debts acquired during the marriage.

Dissolving a marriage is never easy. Unraveling your finances and debts can make this process even more difficult. Filing for divorce and divorce proceedings will not impact your credit. If you and your former spouse have kept separate finances, you're likely to see no direct impact on them either. But some divorced couples hold joint credit accounts, like credit cards or a mortgage. If those accounts are not paid as agreed, it could impact your credit scores and credit reports.

Understand your divorce decree.

A divorce decree may give your former spouse responsibility for a joint account. But that doesn't let you off the hook with your lenders or creditors. If your name remains on the account, missed or late payments may impact your credit. There are also steps to take if you are a credit card authorized user or a cosigner with your former spouse. Consider calling the lender or creditor to find out what options you may have. If you are the primary account holder, you may be able to convert the account to an individual account. Converting it to an individual account will place the account in your name. If you remove your spouse from the account, your credit limits may reduce. That could affect your debt to credit utilization ratio. This is the amount of revolving credit you're using compared to the total amount of revolving credit available to you. This ratio is one factor that impacts credit scores.

During a divorce, there are two main types of property distribution rules. These can also end up affecting credit accounts and debt ownership.

• Community property states. Both are owners of property and debts acquired during the marriage. If you live in a community property state, you and your spouse may both be responsible for any debts. See more about community property states on the Internal Revenue Service website.
• Equitable distribution states. The judge will divide property and debts acquired during the marriage. This does not mean that both spouses will receive an equal split of property and debts.

Consider the impact of missed child support payments.

If children are a part of your divorce decree, you may need to pay child support. If you are behind in child support payments, this can be on your credit reports and impact credit scores. Unpaid child support may remain on your credit report for up to seven years.

Check your credit reports with Equifax^®, Experian^® and TransUnion^®

Not all lenders report to all three Nationwide Credit Reporting Agencies (NCRAs). Because of this, you need to check your credit reports at Equifax, Experian and TransUnion. This allows you to identify joint or shared accounts or debts you may need to address. It will also allow you to make sure there are no fraudulent accounts attached to your credit reports.

With Equifax Complete™ Premier, you can track changes to your Equifax credit report. You can also receive alerts if your personal information is at risk of being on the dark web. Divorce can be hard for several reasons. But with proper planning, you can come out with limited effects to your credit.