Getting Divorced? How does it affect your credit score?
How does divorce affect your credit score?
Unfortunately statistics show that 1 of every 3 marriages ends in divorce, so you definitely are not alone if the relationship ends. The emotional turmoil that divorce brings can easily overwhelm us from considering practical matters, but it is a good idea to be mindful of possible impacts on your credit rating.
The good news is the act of getting a divorce doesn’t directly affect your credit rating, but there are a few significant ways in which the process of separation can end up putting a hit on your credit rating. Though it may not be what’s on your mind right now, a healthy credit score can help you start the next chapter of your life in the best possible way- and with minimal complications.
Your credit worthiness is reflected in your credit score
Lenders use your credit rating (as represented by your credit score) to assess what kind of credit risk you represent. An unhealthy credit score may suggest to the lender that you will have trouble repaying a loan, and you may not get approved.
Of course you may not be thinking of your personal credit score while dealing with all the other stresses of going through a divorce, however, bad marks on a credit rating can take a long time to correct, so keeping your credit score healthy will can be a huge support when you start to build a new life for yourself. When it comes time to buy a new place, a good credit rating will be a major asset in getting a home loan approved.
Make sure the bills are paid
As you begin to divide up assets and responsibilities, it’s important to not let things like your shared bills slip through the cracks. As many huge life changes that divorce can bring, including the many that you didn’t see coming in advance, it’s still to your benefit to make sure the bills get paid in the meantime. Protecting your credit score is critical.
One of the first things you can do is communicate to your lenders and financial institutions that you are going through a divorce. This is especially important if you change your name, to help keep your report accurate.
To help you make sure your bills are paid on time, it can be helpful to set up direct debits or to use mobile apps designed to help you stay on top of everything in your name. That way you have the energy and mental space you need to handle everything else you need to think about and handle.
The dangers of joint accounts
You may want to consider seeking legal advice regarding joint accounts like a shared credit card, and here’s why. If your former spouse has any late payments or defaults, it can impact your credit score. These risks can also apply to a shared home loan. Legal experts can help you understand the right ways to protect your credit and move on with your life without further worry. Taking the initiative to ask your lender to cancel the home loan redraw facility can help prevent your ex from blowing out the home loan debt if the draw down the funds and other such potential nightmares.
What you can do now
It’s a good idea to make a habit of checking your credit score, whether you have just seperated or are working through a divorce. This will help you identify and correct any mistakes in your credit rating before they become a problem. Contact us for advice and information about your rights and responsibilities, so you can make the best decisions for yourself and your family. Call us on 1 800 3 PEASY or visit https://peasy.com.au/ today.