How Getting A Divorce May Hurt Your Credit
You might be in for a rude shock if your credit rating is destroyed as the result of a divorce, but it can happen.
It sometimes happens that a court will order one partner in a marriage to keep up with payments to creditors until the divorce decree is finally granted. But if your relationship is in tatters and communication with your partner is shot, how can you know if they’re keeping up with their responsibilities?
Most divorcing couples share joint debts, and as a result, their credit ratings are unavoidably linked until all their joint obligations are separated and settled legally. Your self-interest dictates that you make payments on time, but what can you do about making sure your responsible behaviour doesn’t protest you?
A sorry credit score can prevent you from moving on after a divorce and the stresses of the process can lead to irresponsible financial behavior by one or both parties. You’ll need to take full control, or at least be aware of, any financial details, like a divorce in Ontario, which could affect your credit score – and you’ll need to do that as soon as possible.
Does Getting a Divorce Hurt My Credit?
It’s fairly likely that you believe a final divorce decree lets you off the hook for any joint financial obligations between you and your ex-spouse, but that’s simply not true. Court orders and divorce decrees aren’t a magic bullet when it comes to both partners acting responsibly.
Court orders don’t do much in the way of protecting a divorcing couple’s credit ratings. Once a married couple signs on the dotted line for any joint loan application, both spouses have entered into a binding legal agreement to pay a creditor. Courts can’t, and won’t, overturn contracts unless they include unlawful elements or circumstances, and amending contracts requires that all parties agree to any changes. That includes creditors.
If your ex-spouse stops making payments, your credit score plummet quickly. Getting your name off of a mortgage or other note means paying it off in full or refinancing.
Credit Bureaus Utterly Ignore Your Divorce Decree
The higher your risk of failing to repay a loan, and the lower your credit score – the more you’ll pay to borrow when it comes to a mortgage, an auto loan or securing a credit card at a reasonable rate.
The three major credit bureaus in Canada, Equifax Canada, NCB Inc. and TransUnion Canada, are totally unconcerned when it comes to the circumstance of your relationship or your pending divorce. That information just isn’t relative to how they do business.
Here are some steps to help you protect your credit score:
- Make sure you’re aware of any joint accounts you might be responsible to pay back. Get credit reports from the three major credit reporting bureaus mentioned above.
- Close any and all joint accounts you can right away. It’s an easy fix if the accounts don’t carry outstanding debt. If you do owe money on an account, have it frozen and transfer the debt to separate accounts in an equitable way.
- If you don’t currently have credit, get a card in your name solely to start building a credit history.
- If you’re in debt for a joint mortgage, you have the option to sell the home and split the proceeds, pay off the mortgage outright or refinance the mortgage and put it in the name of the partner who will keep the property. If you opt to refinance, get it done before your divorce is final to make sure the refinancing goes smoothly.
- Make sure to do your best to make sure your fortunes are no longer tied together financially, it just makes sense and it will help you remove a source of contention during your divorce negotiations.
While the sole fact that you’ve been through a divorce won’t affect your credit rating in the slightest, failing to make payments surely will. If you’re wondering ‘does a divorce show up on my credit report?’ contact the professional attorneys at Fine & Associates for expert divorce legal assistance.