No consumer is prevented from acquiring credit solely based on marital status. The Equal Opportunity Credit Act outlaws discrimination of all forms to provide consumers with equal access to credit resources. If you recently experienced a divorce, however, your credit score may be negatively impacted after you separate from your spouse.
Foreclosure
Divorce can lead to foreclosure. Married couples often share homeownership; but after a divorce, financial obligations shift to accommodate the couple's new separate lifestyles. When the mortgage payments fall behind due to the remaining spouse's loss in income, foreclosure occurs. Foreclosures cause a significant decline in your FICO score. According to CNN Money, most homeowners incur an 85- to 160-point drop in their FICO scores following foreclosure. The foreclosure also remains on each homeowner's credit report for seven years following the loss of the home.
Debt Sharing
Emotional breakups can lead to declines in credit ratings when couples share debts. Divorce can stir a range of emotions in couples. According to Mediate.com, anger, resentment, insecurity, abandonment and hurt are common emotions felt amongst divorcees. Couples don't always act in the most rational manner when it comes to splitting debt responsibilities. For example, a spouse seeking revenge might allow debts to go unpaid in order to watch the other spouse suffer financially. When this occurs, the FICO score of both spouses is negatively affected.
Litigation Fees
Litigated divorce can be costly. Divorce attorneys generally charge an hourly fee or a retainer. When couples are unable to reach a settlement due to disagreements, litigation can stretch over months, leading couples without adequate savings into debt. A couple may be forced to borrow money to cover legal costs that they cannot afford. Borrowing money to cover legal fees is detrimental to the couple's FICO score if the debt goes unpaid. The lender sends the account to collections where an agency might file a judgment to recoup any unpaid balances.
Child Support
Not all divorced couples split custody of their children. In cases where one parent is granted full custody, he can request that the noncustodial parent pay child support. If the noncustodial parent is unemployed, in many states, child support is still due. Noncustodial parents undergoing financial hardship can experience significant credit setbacks due to unpaid child support. Child support payments are reported as a public record on your credit report. The amount you owe and the date your payments began is reflected in your report.
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