Understanding your credit score and divorce is critical as you move into this life-changing process. There is quite a bit of misinformation out there about credit scores and how they are impacted by the divorce process that you do not want to believe, as it could make a difference in the decisions you make.

Know that emotional and financial complexities exist in every divorce. There are numerous factors that will impact you through this process, and some may have an implication on your long-term financial health. Your credit score is certainly a crucial factor in the establishment of financial independence after your divorce.

At Jersey Coast Family Law, our New Jersey family lawyers can help you to better understand the specific relationship between divorce and credit scores in your situation when you set up a consultation with us. We encourage you not to make any decisions until you speak to our team.

Myth vs. Reality: Does Divorce Directly Affect Your Credit Score?

If you stop making payments on your credit card, that will hurt your credit score. If you fail to pay your mortgage on time, that is going to directly cause your score to drop. However, getting a divorce does not, on its own, change your credit score in any way.

Instead, credit scores are dependent on factors like your credit usage, payment history, and the amount of debt you have. It has nothing to do with your marital status.

Noting that divorce can lead to financial struggles. If that happens, it can indirectly impact your credit score. That is dependent on the type of debt you have as well as how you manage it after your divorce occurs.

The Indirect Impact of Divorce on Credit

It is very common for married couples to share accounts. You may both open a credit card or personal loan together, for example. The divorce process does not always eliminate that relationship. That is, you may continue to remain on the same credit card account with the lender after the divorce unless you are removed. 

If you have joint accounts with your spouse, that can affect you post-divorce, depending on the way the debts are handled during the separation process. Here are some ways that this continued financial relationship could impact you:

  • You maintain shared responsibility for payments of that debt after the separation. If you are a joint account holder, that means you hold equal responsibility for the debt repayment, even if you do not create that debt.
  • If the other party is late on a payment (or both parties are), that can impact your credit status with the lender and will be reported to the credit bureaus.

The months after divorce, in which your ex may be working to build a home outside of the marriage, can become expensive. If they run up a big debt on a credit card that they are still liable for, they could face financial damage and responsibility but also have a ding on their score at the same time. Lenders may still hold you responsible for that debt, and failed on-time payments could result in negative payments being reported on your credit report.

The alternative is to address joint accounts during the divorce settlement. Work with your New Jersey family law attorney to fully understand what will happen to these accounts. For example, you may ask to be removed from a credit card that you no longer use. You may wish to pay off the balance on that credit card that is jointly used and then cancel the card. With the help of your attorney, you can create a viable route forward to protect your rights.

Protecting Your Credit During a New Jersey Divorce

Once you make the decision to file divorce, consider the financial implications. Review your finances in full with the help of your attorney. There are several steps we encourage our clients to take to minimize any credit impact.

  • Review joint accounts: Be sure you get the most recent copies of your credit report. Look for all accounts that you are on (if it is listed on your report, you hold responsibility). These are the accounts you need to address.
  • Communicate with your spouse: When possible, work through your attorney or directly with your spouse to discuss how the account will be managed. An agreement not to use joint accounts is one step, but that does not mean they will uphold that agreement.
  • Create separate credit lines: Work to re-establish your own credit by opening accounts in just your own name. If you already have accounts not shared by your spouse, focus on using those and minimize impact on others.
  • Make timely payments: Falling behind on your payments will hurt your credit score. Ensure you know who is paying the debt and put a plan in place to stay up to date.

If you are not sure if you are legally responsible for any debt, let our New Jersey family lawyers help you. Do not assume that you have no responsibility if you have never used the account yourself.

When Legal Guidance Is Essential

We encourage you to stay ahead of the process when it comes to credit score and divorce matters. The best way to protect yourself and your financial future is to work with a New Jersey family law attorney as early on in the process as you can. Your attorney can help in multiple ways, including:

  • Negotiating a fair division of financial obligations within the divorce settlement
  • Help you understand the potential legal consequences you have of maintaining joint accounts.
  • Protect your financial future and creditworthiness.

Schedule a Consultation with Our Family Law Attorneys Now

Contact Jersey Coast Family Law, Where Family Comes First, for immediate help. Our family law attorneys serve clients in Toms River and Red Bank, as well as throughout the state. Contact us at 732-361-4718 to set up a consultation to discuss your divorce and any financial concerns you have moving into this process.