Protect Your Credit During Divorce

By
Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

Yesterday I wrote a blog on an issue that can have a major impact on your credit and future purchasing power, “bankruptcy”. This blog is on another issue that has an equal if not more impact on your credit, purchasing power, as well as your life.

When a relationship is ended by divorce, the lives of those involved are changed forever. Divorce occurs because of conflict. The conflict can come in many different ways, but when dissected in its simplest form, there is always some kind of conflict involved. Conflict causes people to react in different ways, and unfortunately most of those ways tend to have hurtful results. Often the striking out manifests itself in a financial way, and as a result an impact on the credit of those involved.

Because of this the is an immediate need to protect your credit during divorce, because it is very likely that during this time, and even after the divorce that bills will go unpaid, and credit cards maxed out. Depending upon how finances were structured, one or both spouses can have a negative impact on their credit. This however, does not have to happen if one, or both take steps to protect themselves from the negative behavior of the other.

The first thing that someone going through a divorce should do is to get a copy of their Credit Report, and it should be a Tri-Merge report, meaning that it contains all three major reporting agencies, Equifax, Experian, and TransUnion, and go through it very carefully. The report is going to identify each account and who is responsible for it. The accounts that need to be addressed immediately are the ones that are joint accounts and accounts that you are an authorized user on, or the other spouse is an authorized user on. Once those accounts are identified:

  • Immediately freeze the accounts that are joint accounts, so that the other spouse cannot further increase the balances.
  • Remove the other spouse from your account if they are an authorized user on it, for the same reason.
  • Remove yourself from their account if you are the authorized user on it.
  • As an extra safety measure close your accounts that the other spouse is a join or authorized user on, and transfer the balance to an account that is just in your name.

But there will be accounts that you can’t do that two such as a mortgage or car loan. In that case you have two options, sell the asset or refinance it into the name of the one that is going to keep it.

There is a misconception that if a spouse is ordered by the court in a divorce decree to pay a debt that you are protected. The fact is that a divorce decree does not override any agreement you have with a creditor. So if the spouse that is ordered to pay the debt does not, your credit will be equally be impacted. The only safe guard that can be taken in this situation is to not just have the court order the other spouse to pay the debt, but to further issue you a “Hold Harmless”. This is still not an automatic guarantee, but it carries a lot more weight if the other spouse defaults.

As I stated in the beginning of this blog, when a relationship is ended by divorce, the lives of those involved are changed forever. But by following the steps that I have stated here, at least the impact on your credit can be minimized. My advice is don’t get divorce and then you don’t have to deal with any of this, but if you do then you need protect your credit during divorce.

 

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Who To Call For Your Mortgage Needs In Connecticut:

George Souto NMLS# 65149 is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 gsouto@mccuemortgage.com, or visit my McCue Mortgage Homepage. 

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 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who is licensed in #CT, #RI, #MA, #NH, & a #FL Licensed Lender who can assist you with all your #FHA, #Conventional, #VA, #USDA, and #State Bonded Progam #mortgage needs in #CT, #RI, #MA, #NH, & #FL. George resides in Middlesex County which includes #Middletown, #Old Saybrook, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or souto@snet.net

Comments (12)

Ed Silva
Mapleridge Realty, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

George you must have seen something interesting come across your desk the past week or so. A divorce can send many a rational person over the edge before it's done.

May 08, 2011 01:26 PM
Brenda Mullen
RE/MAX Access - Schertz, TX
Your San Antonio TX Real Estate Agent!!

This is some very good advice for those going through a bad time George.  I can't tell you how many times I saw Soldiers (when I was in the Army) credit get destroyed during a divorce, (males or females).  People can get very vindictive if they feel they have been wronged and unfortunately its generally the finances that they mean to hurt with.  Great post!

May 08, 2011 01:48 PM
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

George,

Great advice!

May I add?

If your to receive child support or alimony, your not required by law to disclose it on a credit application. However if you chose to do so (You need the income to qualify.) it's not sufficient to show the court order. You must prove you receive it! Demand to be paid by check, keep a copy of the check and attach a deposit slip. Never just cash the check, deposit it! You'll need copies for the last year or the life of the payments, witch ever is longer.

As you pointed out you are still libel for common debts, but if you can prove your ex makes the payments from his funds only the credit will affect you. Demand copies of canceled checks each month until the account is closed.

On the other hand if you're ordered by the court to pay child support or alimony, you must report it even if you're in default!

Remember a marriage these days is from "I do" to "I don't" but a montage is for 30 years.

Bill

 

May 08, 2011 02:18 PM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Ed, it wasn't anything this week, but I have seen a lot during my time in the business and none of it is ever good when it comes to divorce.

Brenda, at is one of the things I was trying to bring out in the blog, but you said it much better than I did.

Bill you are absolutely right.  Document, document, and then document some more in these situations.  Documenting Alimony and Child Support can be a big issue especially if the one paying it is not consistent,  while if you are the one paying it, it does not matter if you have been paying it or not, it will be counted against your debt to income ratios.  I have to remember your last statement, and I plan on using it.

"marriage these days is from "I do" to "I don't" but a montage is for 30 years."

May 08, 2011 02:51 PM
Ann Hayden 636-399-7544
Berkshire Hathaway HomeServices Select Properties-St. Louis Missouri - Chesterfield, MO
SelectAnn.com

George,

And NEVER sign a document under duress....

Ann Hayden in Wildwood, MO

May 08, 2011 03:15 PM
Diane Rice
Rice Prprty Mgmnt & Rlty, LLC, South Holland, IL - Lansing, IL
SFR, SRES, CNC

Hello George,

In agreement with YOUR advice to STAY MARRIED... or better yet, don't get married at all unless you are committed until death!  Getting IN is the easy part... it's the parting that causes each to take these precautions.  You brought up such useful information for readers - as usual!  

May 08, 2011 09:57 PM
Tanya Runkle
America's Premier Mortgage - Vancouver, WA
NMLS/MLO#307502

Hi George,  wonderful information.  I enjoy reading your posts, this is something people just do not think about. 

May 09, 2011 11:14 AM
Barbara Altieri
Better Homes and Gardens RE Shore and Country Properties - Shelton, CT
REALTOR-Fairfield County CT Homes/Condos For Sale

George -- Unfortunately, credit issues on top of a divorce only adds insult to injury.  You offer some very sage advice for those going through this. I am going to reblog this as it is the type of information those getting divorced may not think about in the short term but can be a real issue in the long term.  

May 09, 2011 11:42 AM
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

George,

Don't you find this ironic?

Giving divorce advice when between us we have 76 years of marriage 152 if we include the girls and we always do.

Bill

May 09, 2011 11:53 AM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Diane, it was til death do us part when I got married, but it just does not seem to have the same meaning today.

Tanya, I am glad that you found this useful, and hope you can use it.

Barbara, thank you for the re-blog.  It is unfortunate that we have to provide this type of information.

Bill I did not think about that but you are right.  The word commitment seemed to have a different meaning when you and I said "I Do" to our wives.  I know that there are good reasons for divorce, but I just see people making that decision way to easily.

May 09, 2011 01:14 PM
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

Great advice George.....I see so many occasions where one party screws up the others credit!

May 10, 2011 01:12 AM
Donne Knudsen
Los Angeles & Ventura Counties in CA - Simi Valley, CA
CalState Realty Services

George - I wish someone had advised me about divorce and credit 21yrs ago.  It took nearly five years afterwards before I was finally able to get back on track.  As a young, naive, 20-something, I was clueless as to the situation that my ex-husband had gotten us into.  What a tremendous learning experience that was for me.  Needless to say, I have never been that stupid and naive again.

May 10, 2011 03:42 PM