Divorce And Credit Ratings – Women Hurt More

saving your credit score after a divorce

Too often people going through divorce fail to consider the impact divorce can have on each spouse’s credit rating. If a spouse is having to start over, he or she wants to do so with as clean a credit slate as possible – but divorce can complicate that goal.

Usually, married couples have joint accounts – joint credit cards, both names on mortgages and other loans. If you have been paying bills on time you have enjoyed collectively a good credit rating; if you have not, you both suffer. When you begin to divorce, those joint debts do not magically go away – even after the divorce when the court awards one party responsible for certain debts. Consequently, it can be months or years before your credit report accurately reflects only the accounts for which you are legally responsible, and if the other spouse fails to pay on time, it can hurt your credit rating.

To protect yourself, you should work with your soon-to-be former spouse in agreeing to close all joint credit accounts and also assure in your settlement that the payment for outstanding joint debts will be doable by the responsible spouse. You can also talk to the credit rating agencies and inform them that according to your divorce decree you are not responsible for certain debts that show on your report (they may or may not remove them given that you still may appear legally liable to the credit agency).

Women should be very vigilant with credit issues because it turns out that divorce tends to hit women’s credit ratings harder. The reason stems from how credit ratings work. First, those with higher income have more credit opportunities and are considered a better risk. Yet, at divorce, women tend to have much lower incomes compared to men. Also, for women who stayed at home during the marriage and cared for the children, the absence from the workforce hurts their separate credit rating. Also, for accounts where women have separate credit, they tend to fall behind on payments during divorce because of the income disparity, which depresses the credit score.

Women can protect themselves and boost their credit rating by cleaning up all joint account issues, establishing independent individual accounts, increasing income, paying on time, and adding more credit accounts. In time, these steps will get you back to a solid credit rating.

If you have questions about credit ratings and divorce, contact us – we can help.