19 Aug Divorce & Your Credit
We certainly don’t like to see anyone facing or going through a divorce. But it is sometimes a reality of life. Many times, members can be shocked or dismayed at what happened to their credit after a divorce. If you or anyone you love is contemplating divorce, there are steps that should be taken PRIOR to seeing an attorney. Here are a few tips:
- Obtain a copy of your credit report. Members can check with KEMBA for a free credit review or you can pull a free copy of your report at www.annualcreditreport.com
- Review every trade line/account to determine who “owns” that debt. Some debt may be in the name of your soon-to-be ex, some may be in your name and some may be jointly held, meaning both parties are responsible. If you are still unsure, you should contact the lender and verify who “owns” that debt.
- A divorce decree does not relieve you from joint debts that were incurred during the marriage. Both parties are responsible for the joint accounts — credit cards, car loans or home mortgages. Even if a judge orders you or your ex to pay a joint account, you both are still legally responsible for making sure it is paid because you promised to do so as a couple. The only way to eliminate fiscal responsibility is to contact and make arrangements to be removed from the account. Most lenders will NOT change the original terms and conditions of the loan. The alternatives are to close the account, pay it off PRIOR to the divorce, or close the account and specifically dictate in the divorce decree who/how will be responsible for paying off the remaining balance. Closing the joint account is key to making sure that additional debt is not added to the account.
- Mortgages can become a tricky area. Even if one spouse “gets” the house and it is spelled out in the divorce decree, both spouses are still jointly responsible for the mortgage until one of three things happen — they die, they refinance or they sell. A divorce decree does not change the terms and conditions of a mortgage. The divorce decree should dictate how the mortgage is going to be reworked — either by a refinance or through the sale of the house. The terms and conditions of the mortgage need to be addressed before the divorce is final and spelled out in the divorce decree. It is not uncommon for people to think because they were divorced, the mortgage was no longer in their name or they were no longer responsible. Unless the lender relieves you of your responsibility, no divorce or divorce degree will change that liability.
- Your ex can continue to impact your credit. Anyone who grants credit (credit unions, banks, mortgage companies, etc.) have a legal right to report negative information to the credit bureaus. If the joint accounts are not closed or paid off and closed, you run the risk of having your credit score harmed if your ex-spouse pays late or doesn’t pay on the debt. If your ex does not pay at all, YOU will be held responsible for the debt and the lender can take legal action against you.
We hope that none of you ever go through a divorce. But if you do, make sure to review and protect your credit through the process.
This information was provided by Experian and edited by KEMBA Credit Union. Please consult your attorney for additional guidance.