How to Protect Your Credit During a Divorce

A divorce isn't just an emotional challenge; it's a logistical one, too. All of a sudden, you’re having to rethink how to pay bills, how to divide debts and how to disentangle credit cards, bank accounts and other parts of a shared financial life.

This can be hard on your finances and force you to reevaluate your budget, make changes to your credit profile and perhaps even find a new place to live. But, it’s also the start of another chapter of your life and a chance to build strong credit on your own. If you’re preparing for a divorce or in the thick of one now, here are some tips to consider.

Does divorce affect your credit scores?

Your credit report contains a wealth of personal data — your name and Social Security number, birthdate, phone numbers and past addresses — but your marital status is not included.

However, some effects of divorce can really impact your credit:

• If the divorce has left you with decreased income, it might be harder to pay the bills, and a missed payment could be detrimental to your credit score. 

• If you’re removed from a former spouse’s credit card, your credit utilization might shoot up because you now have less total credit available to you. This shift could ding your score, even if your personal spending habits remain the same. If it’s a shared credit card you’ve had for a while, your credit age — or the average of how long all your accounts have been open — might also take a hit. 

• If you’re removed from joint loans, your credit mix might suffer as well.

Here are some ways to protect your credit during a divorce.

Make a plan for shared accounts

Unfortunately, a divorce doesn't negate your responsibility to pay off a joint debt. Whether it’s shared credit cards or loans, it’s important to know how to make a clean break. During a divorce, property, other assets and debts are typically divided, and who gets what is outlined in the divorce decree. However, you must go the extra step and contact each lender to get names legally removed from assets that either you or your spouse no longer own.

Credit cards

What happens to your credit cards during a divorce depends on whether you're a joint owner or authorized user. A joint account is less common and creates a more complex scenario. If possible, the balance should be paid off and the account closed; this makes for the cleanest break. Ignoring a joint card will leave you open to liability down the line because you'll be legally on the hook for any further debt your ex incurs on the account.

If you or your spouse was an authorized user on the other's card, you can ask the card issuer about the process for removing the authorized user. After removing the authorized user, it’s a good idea for the account holder to ask the lender for a card with a new number. This will add another layer of security and privacy moving forward.

Loans

Responsibility for a shared loan, like a mortgage or auto loan, can be challenging to navigate. Make a clear plan for who is taking over which joint debts, and follow through on the plan. Sometimes, getting a clean slate may require refinancing the loan to remove your spouse’s name or your own. Be sure to contact lenders to get yourself removed from loans for assets you no longer own.

When it comes to loans, a lot can depend on the state in which you live. There are resources you can use to learn the rules and feel confident about your rights. Your attorney or someone from a legal aid agency (if you meet the qualifications), can alert you to state laws you need to follow. Also, each state government website has information about how to file for a divorce, with links to help you find an attorney in your area.

Open your own checking and savings accounts

At some point in the divorce process you’ll close any joint checking and savings accounts and open new ones just for you. This process gives you financial independence, removes liability for your ex’s spending habits, and acts as a protective barrier to potential vindictive behavior, like your ex draining a joint savings account. 

Once your new accounts are set up, update any automatic payments to avoid getting hit with late fees or “insufficient funds” penalties if lenders attempt to pull payments from old joint accounts. Update your direct deposit information, too, so your paychecks go directly into your new account. Start building an emergency fund if you don’t already have one, so you have a cushion for unexpected expenses.

Build credit in your own name

Consider what credit you have in your own name now, as a newly single person, and add to it if needed/able.

You can start by applying for a low-limit credit card and gradually increasing the limit. If you find that getting approved for a credit card is challenging given your new financial landscape, here are some other places you can start:

• Consider a credit-builder loan. With this type of loan, you apply for a loan amount and make payments over time to the lender, who holds the money in an account. When you’ve made your final payment, the full loan amount is released to you, which means you’ve got a reserve of funds you can use for emergencies or other expenses — plus a record of on-time payments that will help build your credit score. 

• Explore a secured credit card. You’ll put down a deposit when you open the card, and that amount will become your credit limit. Many cards start with a deposit of around $200. Pay your bill in full every month, just like you would any other card, and you’ll likely have the chance to move to an unsecured card down the line.  

• Get credit for on-time rent payments. If you’ve recently moved into an apartment, use a rent reporting service to get credit for on-time rent payments. Payment history is one of the most important factors used to generate your credit score, so this could provide a bump. 

Update your passwords, PINs and contact info

Take steps to ensure that your spouse can’t access your financial information. Freezing your credit with each of the major bureaus — Experian, Equifax and TransUnion — is a solid start to protecting your finances and making sure no one, not even your ex, can open accounts in your name. It’s free to do and won’t harm your credit score.

Change the PINs on your debit cards and the web passwords on all your bank accounts. Make sure that your former partner can’t easily guess the answers to your security questions.

If you’ve moved, make sure to update your address with creditors and financial institutions. Not only will this ensure that important information gets to the right place, but it will add a layer of privacy between you and your former spouse.

How to protect your credit after a divorce

After the divorce is final, it’s a good idea to request and read your credit reports to make sure they’re correct. You are entitled to free weekly credit reports from each of the three major credit reporting agencies. Here’s what to look for:

• Check that information was removed as it should have been, such as a card you are no longer authorized to use or a loan for an asset you didn’t retain.

• Confirm that accounts that now are solely yours no longer list your ex.

• Confirm that information was not updated in error, like your ex-spouse’s new address being listed as yours.

If you find mistakes, you can dispute them and get them corrected. You want your credit reports to accurately reflect your credit history because they are the basis for your credit scores.