Can Divorce Affect Your Credit Score and Financial Stability?

Depending on the case specifics, divorce can harm various areas of your life, including social and financial. Financially, divorce may eventually hurt your credit score. You may wonder what the relationship is between the nullification of your marriage and your credit score, but the truth is that you may not feel the impact immediately.

Family law attorneys in Metro Atlanta say that divorce doesn’t automatically affect your credit score, but the financial decisions you make later on can play a major role in determining your credit health. Seek legal counsel to understand the financial areas that may affect your credit score and what to do to protect your future.

What’s the Impact of Divorce on Credit Score?

Alpharetta divorce lawyers say divorce can positively and negatively affect your credit score. Positively, divorce allows you to separate your financial obligations from your ex. Doing so protects you from potentially taking on more debt or hurting your credit report due to the other party’s inability to repay debts.

Conversely, if you have shared debts during the divorce, the court will divide them up, potentially affecting your ability to repay your share of the debt as determined by creditors. Be well-prepared for such possible outcomes so that you can start working on rebuilding your credit score as soon as you can after the divorce.

Joint Accounts and Divorce

Joint accounts will remain on your credit reports and that of your ex-spouse after a divorce, affecting how creditors view your ability to repay the debt. The records stay until you officially close them or pay them off. So, finalizing joint debt repayments before the court issues a divorce decree is wise to protect your credit history.

Once you settle debts on joint accounts, ensure that the accounts are closed or that your name is removed from joint ownership. This will absolve you of any future responsibility should your ex-spouse obtain more debt on the account without your knowledge.

Divorce Decree Not Honored by a Creditor

The financial ramifications can seriously affect you and your ex-spouse if creditors don’t honor a divorce decree. Creditors have a right to pursue either you or your ex-spouse for the outstanding debt.

Divorce lawyers in Alpharetta highlight that even if a divorce decree stipulates that only one spouse should repay the debt, the other party could still be held liable until the account is legally settled. Since divorce doesn’t automatically absolve you of debts your ex-spouse is responsible for, taking care of them before the divorce is final is essential.

Legal Fees and New Financial Obligations

Divorce can be expensive, especially if it lasts for an extended period. The legal fees can spiral into several thousands of dollars, depending on the case specifics. Additionally, divorce forces you to make new living arrangements, which can strain your finances and increase your credit utilization ratio if you rely on credit cards.

Overall, an unexpected consequence would be harm to your credit score as you try to put up with the divorce process. While it can be challenging to determine how much you will need upfront, skilled family law attorneys in Metro Atlanta can help you make an accurate estimate beforehand. Proper budgeting can help you manage these financial challenges.

Income Changes Can Affect Your Financial Stability

Divorce can move you from a dual-income to a single-income household, affecting your financial stability. It can become challenging to make expenses and debt repayments, especially if your ex-spouse was the higher-income earner who took most financial responsibilities off the plate.

Besides, filing taxes after divorce can affect your paycheck, reducing your financial stability. It can also put you at risk of missing payments, having difficulty obtaining new credit, and being slapped with higher credit card balances, all of which can harm your credit score.

How Can I Protect My Credit Score During Divorce?

The easiest way to handle the issue of divorce and credit score would be to avoid having debt, while the second best way would be to repay all debts before finalizing your divorce. However, since that may not be possible due to various factors, you can still take specific steps to rebuild your credit score after divorce. Divorce lawyers in Alpharetta recommend the following strategies:

Changing Your Credit Card Accounts

Couples often share credit cards, with one party being the primary holder and the other an authorized user. If you both can’t work on repaying credit card debt, work to have your name removed from the account if your ex is responsible for the debt. This goes a long way in preventing damage to your credit score if the account goes delinquent.

Similarly, you should remove your ex-spouse from an account if you’re the primary holder to avoid running large balances. Once you retain control, you can work on paying off the debt before it ruins your score.

Monitor Your Credit Utilization Rate

If you close any accounts, experts say you should expect a slight reduction in your credit score. That’s because the closure affects your credit utilization rate, a metric that shows how much of your available credit you use at any given time.

If your divorce causes an increase in your credit utilization rate, your credit score could drop a few points. You counter this by working to lower your rate going forth.

A Skilled Family Law Attorney Providing Legal Counsel on the Impact of Divorce on Credit Score

When filing for divorce, you may not think that the move affects your credit score, as that seems like a far-fetched relationship, but it has. Skilled divorce lawyers in Metro Atlanta can provide an overview of all the financial aspects of your marriage you need to look into to avoid hurting your credit score.

The legal team at the Hecht Family Law can provide the legal counsel and representation you need to survive this challenging time. We have been handling family law matters for many years, striving to help people rebuild themselves after an emotionally draining encounter.

Whatever family law issue you’re facing, we’re here to help. Call us at 470-291-5342 to schedule a FREE case assessment.