Unfortunately, the opposite is true for a lot of people. Most of the time, at least one spouse's credit is ruined because of broken promises to pay bills, maxed-out credit cards, and a total lack of communication. Depending on how the money is set up, this can sometimes be bad for both parties.
It doesn't have to be this way, which is good news. By being proactive and making a plan for keeping credit in good shape, anyone can make sure that "starting over" doesn't mean having to rebuild credit.
If you are getting a divorce, the first thing you should do is get copies of your credit report from the three major agencies: Equifax, Experian, and TransUnion. It's impossible to come up with a plan if you don't know everything about the situation. (You can get a free credit report once a year by going to www.AnnualCreditReport.com.)
After getting all the facts, you can start to talk about what's most important. Make a spreadsheet with a list of all the accounts that are open right now. Fill in the following columns for each entry: creditor name, contact number, account number, type of account (e.g., credit card, car loan, etc.), account status (e.g., current, past due), account balance, minimum monthly payment amount, and who has access to the account (joint, individual, authorised signer).
Now that you have all this information, it's time to come up with a plan.
There are two kinds of credit accounts, and during a divorce, each one is handled in a different way. The first kind is a secured account, which means that it is linked to an asset. The most common way to keep
loans for cars and mortgages for homes. The second type is an account that isn't secured. Most of the time, these accounts are credit cards and charge cards, and they don't come with any assets.
The best thing you can do with a secured account is to sell the asset. This way, you pay off the loan and your name is taken off of it. Refinancing the loan is the next best thing to do. In other words, one partner pays the other to leave. This only works if the person who is buying the house can get a loan on their own and take over the payments. Your only other choice is to stay on the loan. This is the riskiest choice because if you're not the one paying the bill, your credit is really at risk. If you decide to stay on the loan, make sure that your name stays on the title, too. The worst thing that could happen is that you are forced to pay for something that you do not legally own.
In the case of a mortgage, it is very important to get the help of a qualified mortgage professional. This person will look at your current home loan and the equity you've built up and help you figure out what you should do next.
When it comes to accounts that aren't secured, you'll need to move fast. It's important to know which partner is vested, if not both. If you are just a signer on the account, your name should be taken off right away. If you own the property and your spouse is one of the signers, you should have their name taken off. Any joint accounts that don't have a balance and are owned by both parties should be closed right away.
If there are joint accounts with money in them, the best thing to do is to freeze them. This will make sure that the accounts can't be charged again. But when an account is frozen, it is frozen for both the bank and the customer. Before you freeze all of your joint accounts, you should get a credit card in your name if you don't already have one. Now that you have a card in your own name, you can move any joint balances into your account to make sure they get paid.
If you want to keep your credit, it's very important that you pay off any debts that are in your name. Remember that one late payment of 30 days can lower your credit score by up to 75 points. It is also important to know that a divorce decree does not change any agreements you have with creditors. So, no matter which spouse the judge tells to pay, if they don't, it will hurt both of their credit scores. The message is to get rid of all joint accounts as soon as possible.
Everyone has a hard time with a divorce. By doing these things, you can keep your credit in good shape.
