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It’s no secret that divorce is complicated, and the blast from your break-up can impact almost every aspect of your life. When we work with clients, they’re sometimes surprised to learn that divorce can impact their credit scores, too.
At Bez Law Firm, P.C., our lawyers have years of collective experience handling divorce cases throughout Placer County and beyond. Because divorce is one of the most emotionally taxing legal matters out there, it can be hard to think about things like your credit score at the same time. However, our team can provide the steady support that you need, and with our compassionate advocacy in any divorce matters, you can take stock of your financial portfolio without worrying about the rest.
In this blog post, we’ll help you understand how divorce can affect your credit – and how you can stay on top of any surprise drops in your score.
The Impact of Divorce on Your Credit
In theory, divorce shouldn’t affect your credit at all, as your marital standing isn’t a valid reason for a creditor to treat you differently. But in practice, a difficult divorce does have the potential to cause some financial issues, both for you and your ex-spouse. Communication is the key to resolving many of these issues, but without the right counsel, that communication can quickly break down.
Here are some of the most common ways divorce can affect a credit score:
- Missing payments: You may miss jointly-shared bill payments in all the chaos, or your ex-spouse could fail to pay their half. Either way, even one missed payment can hurt your credit. If open communication with your spouse just isn’t possible, try to stay on top of each payment as best you can, or ask to close any unnecessary shared accounts.
- Mounting debt: When combined with the total cost of divorce, losing a second income stream can make it hard to keep paying down debts. Make sure to take stock of your finances early on and adjust your living expenses, to avoid incurring new debt.
- Hidden accounts: Whether because of vindictiveness or forgetfulness, your ex-spouse may not disclose all the debt and assets you share in common. A skilled lawyer can help prevent this problem, by requesting that a forensic accountant search for hidden accounts.
- Credit limit decreases: Once a creditor discovers that your income was significantly reduced, they may decide to lower your credit limit. Because credit bureaus like Experian and TransUnion consider the ratio of balances to open lines, you’ll need to watch out for this seemingly small factor. If any balance hits 30% or more of the available limit, consider requesting a balance transfer to a low-interest rate card.
- Mortgage refinancing: If you share a mortgage on your home, you may need to refinance it during the divorce. Because this is considered a “hard credit inquiry,” your score will drop by several points, so it’s important to focus your attention on things you can control, like making all your payments consistently.
Are you worried about how a high-conflict divorce will impact your credit? At Bez Law Firm, P.C., we have a Certified Mediator on staff and we can help you communicate more effectively with your ex-spouse during a difficult divorce. Call (916) 512-8944 for cost-conscious solutions in Roseville!