How Much Does a Divorce Affect Your Credit?

Divorce can have a significant impact on your credit score, but it is often overlooked. In this informative blog post, we will delve into the potential effects of divorce on your credit and provide practical tips to help you protect your financial standing. With this advice, we hope that you can minimize the damage and come out of your divorce empowered and financially secure.

Credit Score Calculation

A credit score is a numerical representation of an individual's creditworthiness, typically ranging from 300 to 850. It is primarily calculated using the FICO scoring model or the VantageScore model. Factors that affect credit scores include:

  • Payment history (35%). Timely payments positively impact your score, while late or missed payments negatively affect it.

  • Credit utilization (30%). The ratio of your outstanding credit balances to your credit limits. Lower utilization is better for your score.

  • Length of credit history (15%). The age of your oldest account and the average age of all your accounts. A longer history is beneficial.

  • Types of credit used (10%). A mix of different types of credit, such as mortgages, auto loans, and credit cards, can be beneficial.

  • New credit inquiries (10%). Each time you apply for new credit, a hard inquiry is recorded, which can temporarily lower your score.

The Effects of Divorce on Your Credit Score

There are several ways a divorce can directly and indirectly impact your credit score:

  • Asset division. The division of assets can lead to changes in credit utilization. For example, if one spouse keeps the marital home and refinances the mortgage in their name, their credit utilization may increase, negatively impacting their credit score.

  • Alimony payments. If alimony payments are not made on time, the receiving spouse may report the overdue payments to credit bureaus, damaging the paying spouse's credit score.

  • Changes in income. A decrease in income due to divorce may make it difficult to maintain timely payments on existing debts, leading to late or missed payments and a lower credit score.

  • Shared accounts. Joint accounts, such as credit cards or loans, can be problematic during a divorce. If one spouse fails to make payments, both parties' credit scores can be negatively affected.

  • Legal fees. The cost of legal fees associated with divorce can strain an individual's finances, making it challenging to keep up with debt payments and potentially damaging their credit score. In some cases, people consider covering some of their legal costs using their credit cards, which can also increase your utilization rate.

Get Your Credit Back on Track After Divorce

Whether you have had joint accounts in your name or have been reliant on your spouse's income to pay bills, divorce can set you back when it comes to rebuilding credit. However, there are several steps you can take to get your credit score back on track:

Get Copies of Your Credit Reports

The first step in rebuilding credit after divorce is obtaining copies of your credit reports from all three major reporting bureaus—Equifax, Experian, and TransUnion. Check these reports for any inaccuracies such as debts that do not belong to you. If you do find errors, contact the reporting bureau directly to dispute them and get them removed from your report.

Create a Budget & Pay Down Debt

Once you have copies of all three reports in hand, create a budget that allows you to pay down debt without overextending yourself financially. This means only taking on debt that is manageable for your current circumstances. Also consider consolidating what debt you do have into one loan with an interest rate that fits within the boundaries of your budget.

Reubuild Credit with Secured Cards

If possible, try using secured cards to rebuild your credit score. Secured cards require a deposit upfront which serves as collateral in case of default, so they offer more lenient terms than traditional unsecured cards while still helping build credit over time with responsible use and timely payments.

Talk with Our Attorney

If you are worried about your financial future after divorce, Attorney Bernstein can help you understand your legal rights and options. Once you retain our services, our attorney can advise you on the best course of action concerning property division, alimony, and other divorce-related matters and fight to obtain the best possible case results while protecting your financial health.


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