Will Divorce Hurt My Credit?
Divorce can impact many areas of your life, but one aspect you may not have thought about is how divorce affects your credit score. Marital status is not a factor when it comes to determining creditworthiness but there are indirect effects of divorce that can adversely impact your score. Below are two important things you should know about divorce and credit along with some potential solutions.
Your Ex Fails to Pay Joint Bills
If you have any joint accounts with your ex‐spouse and he or she refuses to pay, it can bring your score down. Perhaps he isn't as concerned with his credit as you are or maybe is not financially able to. Unfortunately, even if he is the one court ordered to make any amount of payments and he fails to do so, your name is also dragged through the mud.
If your ex is not making payments, you may have to pick up the slack to keep your score up. If your ex was court ordered to make payments, you may be able to recover the money later by reporting nonpayments to the court.
You Cannot Pay Your Bills
You may have had to spend large amounts of money on divorce, resulting in financial difficulty on your part. Maybe you can't pay on your loans or you rack up your credit to make ends meet. If you have trouble covering bills on your own, late payments or high credit usage can hurt your credit score. Late payments and high credit utilization make up a large amount of your credit score. Try to keep your credit utilization ration no higher than 30 percent.
If you are struggling here, there are two potential solutions: increase your income or decrease expenses. Work overtime, take on a new side gig and/or cut or limit unnecessary expenses, such as magazine subscriptions, eating out and personal care spending.
Divorce is tough and picking up the pieces afterward often proves difficult but don't make it any harder on yourself in the long run ‐ strive to do all you can to keep your credit score where you want it.
For help on improving your credit, contact us today.