10 Ways Divorce can Affect your Credit

Divorce is tough—and even more so when children or assets are involved. It’s also a busy season in life. Between selling your house, dividing pensions, splitting up savings and working out child support, you might not even think about your credit.

Worried about going through it alone? Don’t be. We’ll explore ten ways divorce can affect your credit, and how you can minimize the impact of a major life change.

Table of Contents

How Does Divorce Affect Your Credit? 

1. Splitting Debt
2. Less Income
3. Refinancing
4. Untruthfulness
5. One-Sided Non-Payment
6. Continued Account Access
7. Decreased Credit Limits
8. Deliberate Financial Damage
9. Decree Confusion
10. Former Spouse

How Does Divorce Affect Your Credit? 

Divorce by itself won’t affect your credit score. Credit bureaus don’t keep track of life changes like marriage or divorce, so you won’t see a new entry on your report. Divorce can, however, affect your finances indirectly. 

If you lose access to a credit card, for instance, that’ll show on your report. Remortgaging can also affect your credit. Let’s explore ten reasons you might see a dip in your score after divorce.

1. Splitting Debt

When it comes to divorce, some states handle the division of marital debt differently than others. If you came into the marriage with debt, or if you took out a credit card or a loan in your name while you were married, you may be responsible for it after divorce. Joint debts, on the other hand, usually remain a joint responsibility. Occasionally, you might find yourself stuck with a portion of your ex-spouse’s debt—it all depends on your state.

If you end up with a larger-than expected portion of the marital debt, consider refinancing options to help you save money on interest charges. Debt consolidation loans, for instance, can lower monthly payments.

2. Less Income

Unless you’ve been the only breadwinner in your marriage, you’ll probably experience some type of dip in income after divorce. Ideally, talk about the changes in your income with your soon-to-be-ex-spouse before the divorce is final. That way, both parties get the chance to plan ahead. 

To avoid falling behind with monthly payments, create a post-divorce budget. Trim off unnecessary expenses—eating out and entertainment, for instance—until you know you can afford them. 

3. Refinancing

Refinancing a home can impact your credit—especially if you’re suddenly a sole borrower. Mortgage applications leave hard credit inquiries behind, which can cause temporary credit score dips. If you’re suddenly responsible for the whole of a home loan, that’ll also affect your debt-to-income ratio, which can impact your ability to get more credit.

If you need to refinance, make sure you shop around for a great deal. Don’t worry about applying with more than one lender—several mortgage applications in a short time generally count as one hard inquiry. 

4. Untruthfulness

Sometimes, divorcing spouses don’t tell the truth when they’re asked to list their assets. If this happens to you, you could end up with more than your fair share of joint debt and less than you’re entitled to from an assets perspective. Occasionally, people add their spouses to accounts without asking them first.

The best way to find out about all accounts bearing your name is to check your credit report. With ExtraCredit, you can see reports from all three credit bureaus at any time.

5. One-Sided Non-Payment

Unfortunately, ex-spouses don’t always pay their portion of joint debt after divorce. When bills aren’t paid on time, credit scores drop. Former partners on the receiving end of this type of behavior are in a catch-22 situation—do they pay their ex’s portion of the debt, or do they suffer the financial consequences of non-payment?

If this happens to you, your best bet is to seek legal advice. If your divorce decree included a payment plan, you may have grounds to insist your ex pays their share.

6. Continued Account Access

If you’re awarded a bank account, a savings account or a pension plan in your divorce, it’s important to take your ex-spouse’s name off. Your divorce decree won’t automatically prompt a change in account holder information—you’ll need to speak to your financial institution in person to make that happen. 

Sometimes, it’s easier to close your joint account and set up a brand new account in your name only. You’ll make a clean break and move forward under your own financial steam—and that can feel really empowering.

7. Decreased Credit Limits

When two incomes dwindle to one, credit card companies often lower credit limits. If you carry a lot of credit card debt, you might suddenly find yourself in the over-limit danger zone. To maintain a good debt-to-credit ratio, you’ll need to reduce your balance—ideally, don’t borrow more than 30% of your total available credit.

Before you apply for another credit card to help distribute your existing balances, take a quick look at your current credit score. Our Credit Report Card can provide a snapshot insight—and it only takes a couple of minutes to sign up. Best of all, it’s free.

8. Deliberate Financial Damage

Occasionally, ex-spouses try to inflict deliberate financial damage upon former partners. Ugly divorces can really take a toll—from lawyer fees to unfair debt distribution and beyond. If you suspect your ex might try to cripple you financially, get legal advice and retain a great divorce attorney. 

Already burdened with damage? In that case, you could benefit from a credit repair plan. Change won’t happen overnight, but you’ll improve your medium-term and long-term financial outlook.

9. Decree Confusion

Divorce can be extremely confusing. Sometimes, people just lose track of the bills they’re meant to pay. While benign, this type of snafu can lead to a ding in your credit record. If you’re not sure what your ex-spouse’s financial obligations are—or what you’re meant to pay for—get in touch with your attorney, your mediator or your family court facilitator.

10. Uncooperative Former Spouse

Some folks simply don’t want to work with their former spouses—especially on financial issues. Mediators are trained to bring people together, encourage amiable communication and sort out conflict. Before you head straight back to court, consider using a mediator to bridge the gap.

When It Comes to Divorce, It’s Better Safe Than Sorry

Divorce may not directly impact your credit score, but it can still make a difference to your financial well-being. Stay on the safe side by keeping track of your score and taking charge of your financial health with ExtraCredit from Credit.com. Loaded with tools to help you get ahead, ExtraCredit can help you build, restore or simply monitor your credit.

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