It goes without saying that a divorce is usually a stressful and difficult process. In all the confusion and emotional pain brought on by a divorce, many individuals find themselves preoccupied by matters other than their financial well-being.
Ignoring your credit is a mistake, albeit a very understandable one, because the impact to your economic situation could affect you for years after your divorce is finalized.
How Divorce Can Affect Your Personal Credit
In the aftermath of a divorce, you may see your personal credit rating decrease.
This can happen, despite the fact that marital status doesn’t play a role in determining creditworthiness, because any joint accounts that you had opened up while married will continue to affect your credit score even after your relationship is over.
While embroiled in the disputes surrounding divorce, it’s easy to fall behind on payments, and this can affect the credit of any one or both of the ex-spouses whose names are listed on the accounts in question.
This doesn’t even take into account the vindictive spending that one partner might engage in to get revenge on the other.
Understand Your Debt and Make a Plan
It’s important to get accurate information on what your outstanding financial obligations are and to whom they’re owed. As part of your divorce decree, the judge may have allocated various debts between you and your partner, but outside companies won’t take this into account.
You’ll therefore have to liaise with your former spouse to figure out ways of each paying whatever is owed whether it be for a car loan, a mortgage, a credit card or some other balance.
Hopefully, you still have a somewhat amicable relationship, otherwise you might find yourself saddled with debts that aren’t legitimately yours.
Even if this occurs, it’s still prudent to pay what you must now and then seek redress in court rather than just ignoring the issue and thereby destroying your own individual credit score.
Separate Your Accounts and Obligations
The best way of avoiding many of the concerns outlined above is by completely separating your finances from those of your former partner.
This isn’t just essential for your financial independence, it’s also crucial for your emotional well-being because you probably have no desire to remain tied to someone with whom you’ve dissolved a longstanding personal relationship.
Remember to remove your ex as an authorized user for all credit cards, bank accounts and other financial tools. This will remove the temptation for him or her to act in an irresponsible way with resources for which you’ll be held liable.
Investigate Payment Plans
Most companies understand the disruption and headaches that come along with divorce, and they’ll do their best to facilitate payment arrangements to get you back on track.
Don’t leave this up to chance. Proactively pursue means of discharging whatever debts could otherwise come back to bite you later on.
Debts that you and your ex undertook together may be especially challenging to manage because you’ll now have to work out some kind of deal to fairly split them up. The cleanest way to do so likely involves one partner buying up the stake that the other has in the joint asset, such as a house or a car. This will keep things simple going forward.
Make Lifestyle Adjustments and Budget Wisely
As a consequence of the end of your relationship, you’ll probably enter into a new living situation.
While this could see you saving some money in certain areas, particularly if your ex-spouse had expensive tastes, other costs that were previously split up between the two of you will now fall squarely on your shoulders.
Making an honest budget will allow you to see where you stand and determine if any changes are required. If your current means are not adequate to support your expenditures, you can curb your spending on frivolous and unnecessary outlays. At the same time, you might be able to increase your income by working some overtime or by freelancing outside your normal job hours.
Divorce brings certain challenges, but it can also lead to liberating opportunities. Take the right steps now to keep your credit rating excellent so that you can enjoy your future life without financial worry.
Maricel Tabalba is a freelance contributor for Credit.com who is interested in writing about personal finance advice for Millennials and college students. She earned her Bachelor of Arts in English with a minor in Communication from the University of Illinois at Chicago.