Divorce has many twists, turns, and consequences— no matter which side you’re on. But, one issue you might not have considered until it happens, is the negative effects on your credit and credit score that a divorce can have. This is not to say that a divorce will inevitably soil these things, but it is a possibility. So, we’re here to give you a helping hand. A divorce doesn’t have to mean bad credit. But, it can if you make some of these common credit mistakes …
Common Credit Mistakes in Divorce: How A Split Can Affect Your Financial Future
Refusing to pay joint accounts
One of the most common credit mistakes a divorcee can make is a choosing not to pay joint accounts. Whether the reason is out of spite, or you’re under the assumption that your to-be ex-spouse is handling the payments— it still can hurt your credit in the long run. It doesn’t matter if your spouse is assuming responsibility, if your name is attached to a default payment— you’re in trouble.
Discarded bills
One other issue many divorcees run into, is their spouse discarding mail addressed to them. This is likely purposeful, or maybe not. However, if you have bills coming in the mail that slip your mind— you could find yourself on the wrong end of a collection call. So, it’s best to make a list of all out-going payments, and redirect those bills to a safe location. It might worth getting a P.O. box for the time being if you don’t have a personal address.
Closing credit cards
You always think to close joint accounts during a separation, and in some ways, that is wise. However, closing a credit card can negatively affect your debt-to-limit ratio. This is essentially just showing how much debt you have in accordance to the amount of room you have in your credit. So, when you close a credit card— that limit goes down, and therefore, your debt goes up. By doing this, you become more of a liability, and your balances go up in the eyes of credit bureaus. This is an easy, and sometimes thoughtless, way that divorce can negatively affect your finances.
Speak with a financial advisor
We can outline some of the general mistakes, but there are plenty more to be made. So, we suggest speaking with a financial advisor as soon as possible. That way, you make sure that your finances are in order, and any moves that need to be made are happening quickly. A divorce is difficult enough without having the added problem of not being able to make a purchase due to credit. So, spend smart, be strategic, and ask for help when you need it. Don’t let your finances tumble because you didn’t think to reach out for help…
