What Happens to Credit When You Get Divorced?

by Ciele Edwards

While every individual develops a credit history independently of his spouse, shared accounts and household financial habits can and do impact the credit scores of both spouses. Depending on the types of debts you and your spouse share, divorce may not immediately sever those financial ties, and your credit report will reflect this fact.

Joint Debts

When you and your spouse share a joint debt, both of you are equally responsible for payment. The Federal Trade Commission warns that your divorce decree does not alter your original contract with the creditor – even if it notes that your former spouse is responsible for paying off the previously shared debt. Should the creditor not receive payment, both your credit and your former spouse’s credit will suffer.

Divorce Decree

A clear divorce decree, also known as a “settlement agreement,” specifying which spouse is responsible for which debt, is crucial for any couple with shared debts. A shared debt does not vanish from your credit report just because you got divorced, and if your spouse doesn’t pay a debt he's responsible for, the result is credit damage for both of you. However, while a divorce decree does not erase your joint liability, it does give you the ability to take your former spouse back to court for reimbursement if you have to pay additional creditors in an effort to preserve your credit rating.

Individual Debts

The only debts that impact your credit are those that appear on your credit report. Your former spouse’s nonpayment of a debt you do not share will hurt his credit while leaving yours untouched. For example, if you took out a personal loan and your former spouse did not co-sign with you for the loan, the loan is your responsibility, and only your credit will reflect payment or nonpayment. The same is true of premarital debts. Any debts you or your former spouse had before entering the marriage remain the responsibility of their owners and appear on the credit reports of those responsible for them.

Preserving Your Credit

One way of protecting your credit during divorce is to cancel joint credit cards and lines of credit. This prevents your spouse from incurring additional joint debt during the divorce process. If you can afford to pay off joint debts, doing so severs the financial tie between you and your former spouse for the account in question. You can also request that the divorce decree stipulate that your former spouse must refinance any assets tied to a joint debt, such as a home, into his own name.

Post Divorce Considerations

If you and your former spouse both worked, a divorce considerably lowers both of your household incomes. Thus, it is imperative that you budget wisely and make smart financial decisions. Good debt management practices, such as paying bills on time and not incurring too much debt, helps you build positive credit after a divorce. In the event you cannot keep up with payments, contact your creditors immediately and try to make alternate arrangements. If the debt is question is a joint debt, contact your former spouse as well. This gives him the option of paying the debt to protect his own credit until you can reimburse him.