Divorces can be messy -- throw finances into the mix and they can be downright miserable to experience. Usually, during marriage, people intertwine their assets and debts, having both their name and the name of their spouse on accounts. This makes preserving or building credit on your own after divorce difficult. Fortunately, you can protect yourself and get your own credit footing by taking specific actions.
Assess Your Finances
To really protect your credit, you have to know about every account you and your spouse have. Make a list of each account that indicates whether the account is single or joint, along with the balance due. If you live in a community property state -- a state in which you and your spouse legally are responsible for each other's debts -- you'll have to assume that creditors may pursue you for your spouse's balances.
Separate and Pay Off Accounts
Once you know exactly what you and your spouse have, sell whatever marital property you can. Use the proceeds to pay off account balances. Because accounts may be reopened if they have a balance, don't assume that simply closing the account has taken care of a potential problem; pay off the balance first and then close the account. Divide the money you have in joint accounts and transfer your portion into an account that only has your name on it.
If you have major joint debt like a mortgage, getting a divorce doesn't change your legal obligation to that debt. The only real way to remove yourself from the financial obligation is to refinance. If you and your spouse have agreed you should have the property associated with a debt, don't remove your name from the title if your spouse refinances. This removes ownership, not your debt obligation. If desired, you may refinance in your own name. This way, you have control over payments and know your spouse won't use the account to trash your credit.
Contact Creditors and Lenders
Even if you live in a community property state, contact your creditors and lenders and alert them of the divorce so they at least know that collection may take some time. If you are in a separate property state where you're not liable for non-joint debts, this contact should stop creditors from hassling you and asking you to pay what your spouse owes.
Get New Accounts
You may not have much of a credit history or score if your spouse handled most of the household finances. Apply for credit, savings and checking accounts in your own name. A bank account is important because banks report to ChexSystems, a consumer reporting agency similar to credit bureaus. Creditors and lenders review ChexSystems reports just like credit reports. Without a good ChexSystems history, you may have trouble getting a bank loan later. Get a cosigner if necessary.
Get Your Credit Report
Getting a copy of your credit report lets you monitor whether your spouse is hurting your credit by not paying on joint accounts as agreed. It also lets you identify areas of your credit that need some TLC and refute incorrect information.
Pay Bills on Time
A major part of your credit score is your credit history, which details how you've paid on your accounts. Be ruthless about paying everything you can on time. If needed, use refinancing, consolidation, credit counseling and other techniques to reduce what you owe and get your budget to a manageable point. When you pay off a balance, keep the account open if it contributes significantly to your credit history length.
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