When people think of certain instances that can sink a credit score fast, usually the likes of foreclosure and bankruptcy are among the first things to come to mind. And rightfully so – as these can cause your credit score to immediately drop by 100 or more points, not to mention stick on your credit report for several years to come.
But after foreclosure and bankruptcy, one of the next most significant instances that has the tendency to derail a credit score is a divorce. Now, a divorce on its own won’t have any effect on your credit score – however, how you and your spouse separate financial accounts may have a secondary impact on your score.
So, how do you prevent your credit score from taking a nosedive during and after a divorce? Let’s take a look at three simple things:
Know What’s Linked to Your Name
Chances are even if you’ve been married for a long period of time, you and your spouse didn’t share every single account. For instance, maybe your cars were financed in your name. Or maybe you have separate credit cards. One of your names may only be on the home where you live. There’s also a good chance that you’ve lost track of whose name is on what account over the years – and the best way to take stock of this is to pull your credit report from the three major bureaus. This will help you better understand what accounts are joint and which ones are not.
On a side note, if your spouse was added as an authorized user to your credit card, make sure to immediately remove him/her so they can no longer use it.
Try to Work Amicably to Pay Off Joint Accounts
If you share a credit card with your spouse, make every effort to amicably settle the debt so that you can close it. Usually, such accounts can be split right down the middle – and any earned rewards can be evenly dispersed. If you cannot pay off the balance in full with your partner, a payment plan is often an option.
You can also try to transfer your portion of the debt to another card that you’re in sole possession of. You don’t want joint accounts left hanging in the balance, as you’ll both pay the price on your credit score if debt isn’t resolved or, worse yet, if it grows.
Consider Freezing Your Credit
Freezing your credit was a popular topic back when Equifax was hacked in 2017, compromising confidential data of nearly 150 million Americans. Simply put, freezing it prevents anyone from opening a line of credit in your name without your specific consent. It’s a great arrow to have in your quiver if you believe your information has been compromised, and it can also come in handy if you believe your ex-spouse may be attempting to use your information for their benefit. And if you yourself need to open a line of credit, all you need to do it un-freeze it by contacting the credit reporting bureaus