By Tracy Achen
How much can divorce affect credit scores? I never thought it made much of a difference, and was always offended by finance company ads aimed at people who had lost a job, gone through a divorce, or had no credit history.
Come on, is getting divorced really as bad as losing your job? Little did I realize just how much getting divorced could affect my credit until I went through it myself.
After the big split, I found myself maintaining the same household on greatly reduced resources. On top of that, I had taken on a higher portion of the debts to insure that they were paid. Unfortunately, what was manageable while I was married soon became the ultimate juggling act as I tried to pay bills before their due date.
Next thing I knew, the state had placed a lien on my house and vehicle due to unpaid taxes on my ex's business. While I was still reeling from that shock, I was notified by a collection agency about my ex's delinquent credit card debt (which wasn't disclosed during the divorce). Thanks to community property laws, I discovered that I was equally responsible for that debt. Before I knew it, my good credit had gone down the drain.
Regrettably, my story isn't unique. Many divorced people find their credit in shambles in the months and years after their divorce.
Not only are they dealing with their own financial devastation, they may also have to worry about joint accounts that weren't closed during the divorce. For example, your decree may state your ex is responsible for the mortgage that was in both your names. If he fails to make the payments and it goes into foreclosure, the lender will still hold you responsible for the payments. The bottom line is that lenders are not bound by a divorce decree. This is why it is so important to either pay off or refinance all joint debts.
And while it's true that most people are able to financially bounce back after their divorce, their credit scores don't tend to rebound near as quickly.
Even if you don't know the difference between a bowling score and a credit score, it can affect your life in many ways. Want to rent a house or an apartment? If you have a bad credit score, a potential landlord may turn down your rental application. Since part of your credit score is determined by how you've paid debts in the past, a poor score indicates that you may not pay your rent on time.
Your score may also impact how much you'll have to put down as deposit when you sign up for a cell phone or turn on utilities at your house. And many employers now check a persons credit score as part of the hiring process. It would be a shame to lose out on a good job due to a poor credit score.
Ultimately, your credit score affects whether or not you'll be able to qualify for credit and the interest rate you'll pay on your mortgage, auto loan, credit cards, and other debts. As your score increases, so will your chances for approval (and you'll often qualify for a lower interest rate to boot). Since your financial future is now under your control, it makes sense to keep your credit score as high as possible.
Tracy is the author of Divorce 101: A Woman's Guide to Divorce.
Now that you've learned how divorce affects credit scores, you can start making changes as soon as the two of you decide to go your separate ways. For information about protecting and rebuilding your credit, these articles can help: