5 Ways to Protect Your Credit During a Divorce

http://www.dreamstime.com/royalty-free-stock-photography-credit-cards-image29026187Knowing how to protect your credit during a divorce is critical to your financial future. Going through a divorce is emotionally draining and can be very time consuming.  As such, sometimes finances get pushed to the back burner.

It’s not a smart thing to do though. When emotions run high, some people do crazy things. Crazy and unpredictable things, so unfortunately your credit can be in a dangerous position when you split with your spouse.

Before we start through the tips, here’s a bonus tip: the first thing you will want to do is pull your credit report.  You’ll be using it a lot to prepare for your divorce

Here are five ways you can protect your credit during a divorce:

1. Know ALL your credit and debit lines.  When couples are married for many years, it is easy to forget about that random department store credit card you and your spouse opened years ago. Since you’ve pulled your credit report, go through it and review it, and make sure you understand what is on it. Note which ones are listed as individual, joint or authorized user accounts, and proceed accordingly (as we’ll discuss in the next tips).

2.  Remove your spouse as an authorized user from credit cards.  After you pull your credit report, check it for any credit cards that list your spouse as an authorized user. If they are listed as an authorized user, that means they are not responsible for repaying any debts they incur on that card, but they are able to charge on the account.

Call the credit card issuer and ask for your spouse’s name to be removed.

3. Unseparate joint accounts.  You will also want to separate any joint accounts you may have, such as a credit cards.  This process can be a bit more difficult however, since you can’t just remove yourself from a joint account normally.

Ideally you should pay off and then close any joint accounts you might have before going into the divorce. However, this isn’t possible for a lot of couples so the next best thing is to turn joint accounts into individual accounts. For example, transfer the balance of your joint credit card to another that is in your or your spouse’s name only.

4. Monitor remaining joint accounts.  Sometimes joint accounts can’t be transferred easily, such as a mortgage. In this case, let’s say your spouse agrees to continue paying the mortgage on the home you own together.  Of course, you’ll want to ensure this is properly documented in the divorce agreement, but in addition, you’ll also want to monitor those joint accounts.

Ask your lender to send you a copy of the joint account’s statement each month.  Some may do it automatically, while others may allow access to account statements and records online. Do this even if your ex has agreed to make the payments, that way you can catch any missed payments before they damage your credit.

5.  Create a post-divorce budget.  One of the most difficult parts of a divorce for many people is that their income typically decreases (especially if you’re moving from a dual-income household to a single-income household) and expenses increase.  Some people tend to get in over their head with expenses rapidly stripping their income, either from divorce expenses or perhaps from frivolous spending stemming from the emotional turmoil of divorce.

The best thing to do is create and track a monthly budget that includes your steady income and all expenses.  Mortgages, utilities, credit card payments, auto loan payments, property taxes, insurance, etc.  Unfortunately, you may be faced with making some hard choices if you find that your expenses exceed or come close to exceeding your income, but it’s better to know ahead of time rather than accumulate a huge pile of debt that you will then be stuck with!

Follow these tips and take a proactive approach to managing your credit during your divorce. Doing so will ensure that don’t have your financial future marred by a revengeful spouse or simply by being uninformed of your current state of finances.

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