Does Divorce Show Up on Your Credit Report?
Your credit report shows the number of credit accounts you have, the length of your credit, how many hard inquiries have been made, whether you have missed payments within 7 years, and your rate of revolving utilization. Your marital status does not show up on your credit report, and your divorce itself does not have a direct effect on your credit.
How Divorce Can Impact Your Credit Scores
Your divorce can hurt your credit score based on the changes in your income, joint accounts, and debt division determinations. The change in your income can impact your ability to make payments, and as we mentioned, missed payments can negatively affect your credit score. Missed payments also remain on your credit report for years to come.
In some cases, joint accounts can negatively affect your credit if you do not address those accounts after your divorce. Many people mistakenly believe that their divorce decree voids their lender contracts. However, that is not true. If you have a joint mortgage or shared accounts that your ex-partner is given in the divorce agreement, you can still be penalized legally if they miss payments.
For instance, the court awards your ex-spouse the home, mortgage, and a shared credit card. If your name is the mortgage loan and credit card account, you are technically still responsible for the account. You will need to take steps to remove yourself from the contract and account so that your spouse’s payment activity (or lack thereof) does not impact your credit score.
Divorce can also indirectly affect your credit if you use your credit cards or loans to cover certain divorce-related expenses. As we mentioned, revolving utilization is a key factor in determining your credit score.
Revolving utilization is essentially the total balance owed on a revolving account divided by the total credit line. For example, $2,122 owed on $8,000 credit line is a 27% utilization rating. The higher that utilization rate gets, the more your credit score can be affected. Thus, during your divorce, you should be mindful of your debt management practices.
Consult with Our Team
Backed by over 22 years of experience, the attorneys at The Neshanian Law Firm, Inc are dedicated to helping clients smoothly navigate the divorce process. Once you retain our services, we will not only support you throughout the process but will also work to ensure you understand the financial and legal implications of the decisions you make.
Getting divorced doesn’t have to be financially devastating. Working with our attorneys, you can fight to protect your best interests and make decisions with an understanding of the divorce mistakes that can cost you, such as failing to remove yourself from joint accounts once the property and debt division is concluded.
Learn more about how we can help by calling (949) 577-7935 or reaching out online to schedule an initial consultation.