Five steps for cleaning up your credit after divorce
Filed under: Debt, Relationships
One reader recently wrote:"Since the country has recognized the banking hardships being faced today, I have received two notices reducing my credit limit on my cards to the amount that I presently owe. My maximum's on both of these cards was double what they reduced it to. I recently got a divorce and my credit file is full of bills and statements that are attributable to my ex-husband, however, I haven't had a chance to sit down, go through the list and make the corrections. I am not late, I pay these cards on time, and feel extremely angry about their arbitrary action."
Unfortunately, I hear this problem too often. Even if you are just an authorized user on the outstanding credit cards, the credit card companies can include the record on your credit report. When you know you are separating from a spouse, the first thing you should do is contact all your credit card companies, tell them about the pending divorce, ask that they freeze any joint accounts (which means no new charges will be allowed) and ask that your name be removed as an authorized user on any accounts under your spouse's name.
Separating your financial entanglements as soon as possible is critical as soon as you start a divorce process. Don't wait until the divorce is final. You could be held responsible for any debts your spouse runs up during the divorce process if you don't notify the creditors on accounts you hold jointly.If you are facing a problem similar to the one of our reader above, you must take the time as soon as possible to clean up your credit history. Here are the steps:
1. Get a copy of your credit report from all three credit reporting agencies. You can do that for free at annualcreditreport.com.
2. Contact all creditors on that report that list accounts you no longer use. If you are an authorized user on your ex-spouse's credit cards, ask the creditor to remove your name and to stop reporting your name to the credit bureaus as a user on that account. You will need to notify them that you are divorced.
3. If you find any accounts for which you have no responsibility or are not an authorized user, contact the credit reporting bureaus and notify them that the account is not yours and should be removed from your report. When you get your free credit report copy the credit reporting agencies will give you instructions for how to correct the listings.
4.When the credit reporting agencies complete corrections to your report they should send you a corrected copy. Check it again for accounts that should not be there and send additional corrections if necessary.
5. Once you know your reports are clear, recheck your credit score. it could take a few months to get back to where it was, but once you have a score over 700 call any creditors who lowered your available credit and ask them to reconsider.
Lita Epstein has written more than 25 books including the "Complete Idiot's Guide to Improving Your Credit Score."
Reader Comments (Page 1 of 1)
11-20-2008 @ 5:41AM
Chris said...
Those that take this advice must understand the short-term consequences of removing authorized user accounts and closing or freezing joint accounts. In most cases, this will result in a decrease in one's credit score. Especially if most of the debt was in one's spouse's name while the other was primarily just an authorized user.
If a new home needs to be purchased or an apartment rented due to the separation or divorce - these actions can cause severe problems.
While in the long-term it's best to separate any joint debt - in the short-term, each individual must weigh the pros and cons of such action.
Reply
11-20-2008 @ 5:54AM
Lita Epstein said...
Chris,
While it's true that in the short term there could be a hit to one's credit score, if these actions aren't taken and a soon-to-be ex-spouse racks up a lot of credit on a joint credit card, one could be in for years of a credit disaster.
The best way to avoid this problem is to always be sure to have credit cards in your own name and not depend solely on your spouse as an authorized user.
Lita
Reply
12-02-2008 @ 5:10PM
Annette said...
Prior to divorcing I agree one should sit down and look at ones credit report. If done right the marital bills should be presented to each other and decide how they should be settled equaly and fairly. Both parties should be civilized over the accounts and settle them since each party wants to move on with their lives and not have to be the sole barrier of the martial bills.
Reply
12-02-2008 @ 5:44PM
Deb said...
If you are an authorized user you are not able to remove yourself from a credit card. The primary user has to do this. I learned this from experience.
Reply
12-02-2008 @ 5:35PM
Lita Epstein said...
Deb,
Did you inform the creditor of the divorce? In divorce situations creditors usually handle it differently and will remove your name. If there is a problem with the account, they may also freeze the card.
Lita
12-02-2008 @ 5:45PM
Tina said...
My husband and I are planning to separate. Thankfully we have no joint bank accounts or credit cards and no authorized users on those accounts. What we do have is a vehicle in both our names, I had the good credit and he had the salary. He's been having trouble keeping up with the payments as of late and I've noticed some changes in my credit. Two of my accounts have reduced my credit limit. Am I stuck with this vehicle that I don't even drive or want, or can I remove my name?
Reply
12-02-2008 @ 5:51PM
Lita Epstein said...
Tina,
This is why it's so critical to separate finances as soon as one knows of a likely separation. If the car credit is held as a joint account, the creditor will not remove your name because he knows he can go after you if your husband doesn't pay.
Unfortunately the debt shows up on your credit record even though he is responsible for the payments. Credit limits are being reduced rapidly as soon as the credit card companies see any indication of late payments.
You can protect yourself when you try to apply for credit in the future if you make sure it is stated in the divorce decree that he is responsible for the debt. When you have that in writing form the courts you can show it to a potential creditor and often they will give you consideration. The best thing to do would be to just make your soon-to-be ex take a loan and pay off the joint debt, but if he has bad credit that will be hard for him to do.
I had a similar problem with an ex in the past. I ended paying off the debt (even though it was his debt) and getting more of the joint assets to offset taking on that debt - but at least I saved my good credit.
Lita
12-25-2008 @ 11:50PM
Booby said...
We all think we will be married forever but things just happen. I am on marriage number 4 which may end soon. All of my wives were fabulous, well educated and beautiful. I am still friends with each of them.The break ups were totally different in each break up. Actually, I have only had two divorces as my soul mate third wife died-breast cancer.
I remarried too soon with a broken heart. It was a mistake. OUCH this marriage thing is extremely hard to predict.
Bobby
Reply
12-03-2008 @ 7:11AM
mia said...
i'm in mediation now and the mediator seems to think that my so-to-be ex should NOT be responsible for the marital debt on the home i will be trying to keep (saying i will ultimately benefit from what was purchased). we had separate accounts but the debt is still joint, right?
i've also been told that the joint debt stopped when he moved out...the mediator says no. is this true?
Reply
12-03-2008 @ 7:20AM
Lita Epstein said...
Mia,
Whether or not debt is joint is dependent upon who signed the original debt agreement. If it's credit cards and you were joint applicants, then it's a joint debt. If it's a mortgage on a house and both your names are on the mortgage, then it's joint debt. Creditors will not agree to separate joint debt even if the divorce decree names one party responsible. If the responsible party doesn't pay the debt, the creditors will go after the other party on the debt agreement. That's why I recommend that debt be separated, which usually means someone has to refinance the joint debt.
You may want to talk with an attorney that represents your interests to be sure you are getting a fair deal.
Lita
Reply
12-06-2008 @ 6:23PM
alan said...
Best way to avoid divorce, and all the pitfalls, Dont get married.Been there,seen it,done it....never again
Reply