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How to Protect Your Credit During a Divorce

How to Protect Your Credit During a Divorce - check those accounts!

Grab these six tips for how to protect your credit during a divorce.

This may be the last thing you’re thinking about when going through a divorce, but it is incredibly important to know how to protect your credit during divorce. Many people – mostly women – have suffered the burden of destroyed credit. Today’s expert, Kathy Vasel from Crosscountry Mortgage, is here to give you some information to help. Read on for her helpful information and six great tips!

Lenders you currently owe money to do not recognize a divorce. If the judge gives responsibility to pay an account to one of the parties, it does not mean the other party is no longer financially responsible in the creditor’s eyes. On the joint accounts that you both signed a contract for, you are responsible for the debt. If one of you does not pay as agreed, then the other joint party is still responsible, and you could both end up with late payments, or even worse a charge off or collection could get reported on your credit report if it goes unpaid.

A divorce or a divorce decree will not impact your shared liability accounts. If there is existing negative joint credit history from your ex, that account history most likely will remain on both of your credit, even after the divorce. By law, the creditor cannot close the negative joint account just because you are getting a divorce. The good news is that your credit FICO will not be affected simply because you are getting a divorce if both parties continue to pay responsibly on the debts that are owed.

How your credit is impacted is dependent upon how the joint liability accounts are being handled. For example: if all parties pay their joint credit card accounts as agreed, your credit and your ex’s credit will have positive ratings. However, if you have joint credit card debt with your ex and he/she agreed to pay that debt in the divorce, but then neglects to pay, the negative reporting stays on both of your credit for 7 years. Unfortunately, despite what the judge ruled for your ex’s responsibility, missed payments will still report on joint credit accounts.

What can you do to protect your credit during a divorce?
1) Prior to your divorce, change all joint accounts to an individual account. Be sure to check any accounts that have not be used in many years to not forget any.
2) Consider refinancing. Home mortgages must be refinanced to remove one of the parties if both are borrowers. If you will be the borrower to refinance, you will need enough income to qualify for the payments and a passing FICO. The great news is, if there is equity in the home you can use that to assist to pay off debts, pay off your ex, and you may not need any funds to close. Additionally, a parent can co-sign if you need assistance to add more income to qualify.
3) Guard yourself against future identity theft. Your soon to be ex-spouse is armed with all of your personal information and can do major damage.
4) Open and maintain a credit monitoring on all 3 credit bureaus so you can monitor monthly what is getting applied.
5) Change your online passwords to private information.
6) Change your bank account numbers and online account information.

Great information Kathy – thanks! For additional questions about your credit or mortgage, contact Kathy Vasel.

While you are going through all of this remember there is light at the end of the tunnel. You’ve made this decision because you feel it is best to go through the needed hardship and separate than stay in an unhealthy relationship. And with this information on how to protect your credit during divorce you are now empowered even more to let time heal your pain while you stay in good standing for your future!

 

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