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Your Credit Report Doesn’t Care What Your Divorce Decree Says
There’s no sugar coating the fact that divorce can be an emotional nightmare. Legally dissolving a relationship where you once promised each other “until death do us part” is rarely pleasant.
However, it’s not only your emotions that can take a hit when you go through a divorce. Your credit reports and scores could be in for a tough time as well, even if you think you’re doing the right thing via your divorce settlement.
What Is a Divorce Decree?
One of many unpleasant tasks your divorce attorney may help you to navigate during a divorce is the division of your marital assets and debts. When it comes to splitting the responsibility for the debts you acquired during your marriage, you must either come to a settlement with your ex or the court may come to a decision for you both.
Once your divorce is finalized, you’ll receive a copy of a document known as your divorce decree. A divorce decree is the official, legal end of your marriage. The document details, among other things, the court’s final ruling regarding any debts you and your ex acquired during your marriage. The divorce decree will give details about which spouse the court has deemed to be responsible for each individual debt.
The Bad News about Divorce Decrees
For a lot of people, the following statement comes as a bit of a shock: Your creditors and debt collectors do not care about your divorce decree.
Furthermore, a divorce decree isn’t going to do anything to protect your credit. Your lender wasn’t a party involved in your divorce. Therefore they’re not going to honor any new agreements you made with your ex-spouse, nor are they bound to accept a judge’s decision regarding whom the court may hold responsible for a debt.
A divorce decree is not going to supersede the original agreement you made with your lender or credit card issuer. It won’t negate your legal obligations to repay a debt. It won’t protect your credit reports from damage if your ex doesn’t continue to make payments on joint debts. And it won’t protect you from being sued.
Your divorce decree does NOTHING to separate you from debts you were obligated to pay during your marriage. Your divorce attorney should explain this to you.
Solutions for Joint Accounts
You and your ex-spouse have separate credit reports. Your reports do not merge when you get married, nor do they separate when you get a divorce.
However, if you jointly applied for any credit cards or loans with your spouse while you were still married, then those joint accounts will most likely show up on both of your credit reports, even after your divorce is final. If any of those joint accounts are managed poorly after your divorce, then that mismanagement will likely damage all of your credit reports and credit scores.
It’s always a good idea to maintain credit independence whether before, during, or after marriage. However, if you already made the mistake of opening joint accounts with your ex, then the best way to protect your credit moving forward is going to be to separate those accounts ASAP.
If possible, you may want to start by paying off and closing any joint credit card accounts. Closing credit card accounts is generally a bad idea, but divorce can be a special exception to this rule.
With larger debts such as mortgages and auto loans, it’s best to refinance those debts into the name of the spouse who will be maintaining ownership of the asset. If refinancing isn’t feasible, then another option which often works well for separating spouses is to sell the asset (i.e. the car or home) and then use those funds to pay off any jointly acquired loans.
The only way to effectively protect your credit (and the credit of your ex-spouse, for that matter) during a divorce is to completely eliminate all joint debts one way or another. Anything short of this option could ultimately come back to bite you down the road. It’s much easier to divorce your spouse than it is to divorce your creditors.
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John Ulzheimer is an expert on credit reporting, credit scoring, and identity theft. He has written four books on the topic and has been interviewed and quoted thousands of times over the past 10 years. With time spent at Equifax and FICO, Ulzheimer is the only credit expert who actually comes from the credit industry. He has been an expert witness in over 230 credit related lawsuits and has been qualified to testify in both federal and state courts on the topic of consumer credit.