Going through a divorce can wreak havoc in all areas of life, including your finances and credit. While you may have other primary concerns, such as who will get custody of the children and how parental time will be split up, your life after the divorce will be greatly affected by how you handle your finances. Protecting your credit during and after your divorce should be a top priority.
- Request a copy of your credit report. You need to know about all accounts that have you listed as a borrower, especially when you weren’t responsible for family finances. Make a list of all accounts, including amounts owed, and work with your divorce lawyers to determine who should be financially responsible.
- Close all joint accounts. After deciding who should be responsible for which bills, you should close any joint accounts and transfer the balance to the appropriate party. Sometimes you can have the other person’s name removed from joint accounts without closing them entirely. Either way, make sure your finances are separated going forward.
- Liquidate joint assets. Obviously this would mean selling the house. If you have negotiated an agreement about who will keep the house, make sure the mortgage is in the right person’s name, or both parties could be held liable in the event of foreclosure. If you have other material assets you’ve bought together, such as a boat, recreational vehicle, second home, investment property, etc., be sure to sell the assets or transfer ownership to the appropriate person.
- Divide your money. This can be fairly straight-forward in the case of a joint savings account, but can get trickier when it comes to other investments, such as stocks or bonds. You can make trade-offs for investments that haven’t matured, but be sure that funds will be disbursed correctly.
- Take out credit in your own name. Historically, it has been difficult for women to get a loan after a divorce because they were typically not primary wage-earners. Although times have changed, getting approved for credit on a single income is harder and more costly than taking out debt as a couple. You can and should seek credit in your own name soon after a divorce to establish a positive credit history and boost your credit score.
Divorce can be ugly, but you don’t want to carry that trauma forward into your financial future. Make sure you understand the basics about using credit wisely, and always monitor your credit report and score annually.