Protect Your Credit During A Divorce

Reblogger Shannon Coe
Real Estate Agent with Keller Williams

This is a good article if your going through divorce. But the reality is that sometimes it is impossible to keep all the payments up when your in the middle of the divorce.

If you are not able to avoid having credit hits the next best option is to start your recovery and get working on improving your credit as soon as you can.

Divorce is hard, but it gets better and so can your credit.

Shannon Coe Realtor #01489731

Allison James Estates and Homes

916-741-1664

ShannonCoeTeam@gmail.com

Original content by George Souto NMLS #65149

Lately I have been running into more and more couples that are either going through a divorce, or are divorced.  In both situations there is usually a need for one spouse to refinance the other spouse off of the mortgage, or purchase a home for themselves.  However, quite often divorced couples are not able to refinance or purchase because of credit issue that were created during and after the divorce. These situations have really heightened the awareness for me of the need to Protect Your Credit During A Divorce

When a relationship ends by divorce, the lives of those involved are changed forever. Divorce occurs because of conflict. The conflict can come in many different ways, and unfortunately the conflict will result in the two parties involved reacting in hurtful ways towards each other.  Often the striking out manifests itself in a financial way, and as a result an impact on their credit.  Because of this there is an immediate need to Protect Your Credit During A Divorce

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 they 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 the account if they are an authorized user on it, for the same reason.
  • Remove yourself from the other spouses account if you are the authorized user.
  • As an extra safety measure close 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.

However, there are accounts that the above steps can't be taken on, such as a mortgage or car loan. In those cases there are only two options, sell the asset or refinance it into the name of the spouse 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 the other spouse is protected. The fact is that a divorce decree does not override any agreement made with a creditor. So if the spouse that is ordered to pay the debt does not, the other spouses credit will be negatively 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 a “Hold Harmless”. However, even 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 outlined above, at least the impact on your credit can be minimized. My advice is to do everything possible to avoid divorce, but if divorce cannot be avoided, then you need to do everything possible to Protect Your Credit During A Divorce.

 

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 Info about the author:

George Souto 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 or gsouto@mccuemortgage.com

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Rainer
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Dan Hopper
Dan Hopper - Gold Way RE - Westminster, CO
Denver Broker / Author / Advocate/Short Sale

Shannon, great topic to discuss!  So often, the reasons for a divorce have to do with "financial stress".  There are many times that the damage has already taken place on a couple's credit score.  Yet, it never hurts to understand what each party can do to minimize that "dreadful hit" to their scores!!

Very good!!

Apr 18, 2013 01:11 AM #1
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Shannon, thank you for the re-blog.  Divorce some times can't be avoided and neither can some of the credit issues that follow.  But hopefully it can be minimized, and the road to recovery sooner than later.

Apr 18, 2013 01:20 PM #2
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Shannon Coe

916-597-3818, Lincoln, Rocklin, Loomis, Roseville
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