The Good, the Bad and the Ugly...Your Credit after Divorce

As a certified credit counselor I hear from people everyday struggling with post-divorce debt and subsequently tarnished credit.

Most people haven't the slightest idea where to find help or the answers they need regarding credit card debt and how it may affect their credit report following a divorce.

In the overwhelming event of a divorce sometimes we neglect our finances and end up putting ourselves in situations that are not easy to get out of.   

One of the biggest challenges you face financially as you weed through your debts during a divorce is who gets what debt in the divorce settlement and how your ex's lack of payment can affect you and your credit. 

The FTC has an example of just this type of situation:

"Mary and Bill recently divorced. Their divorce decree stated that Bill would pay the balances on their three joint credit card accounts. Months later, after Bill neglected to pay off these accounts, all three creditors contacted Mary for payment. She referred them to the divorce decree, insisting that she was not responsible for the accounts. The creditors correctly stated that they were not parties to the decree and that Mary was still legally responsible for paying off the couple's joint accounts. Mary later found out that the late payments appeared on her credit report."

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As stated in the example even though Bill was given the accounts as part of the divorce decree because they were joint accounts Mary was still responsible for them. Unfortunately, lenders and credit-reporting agencies don't care about what your divorce decree states.

If your name is on a joint account you are responsible for making sure that debt gets paid. 

So how can you protect yourself from finding yourself in a situation like this?

The first step is to understand the difference between joint, individual and authorized user accounts.

Joint, individual and authorized user accounts  

• Individual Account.  With individual accounts your income, assets, and credit history alone are considered by a potential creditor. Meaning you alone are responsible for paying off the debt regardless of your marital status. The account will show up on your credit report and if your spouse is an authorized user of the account on their's as well.
• Joint Account.  With joint accounts yours and your spouse's income, assets, and credit history are taken into consideration. If you are one of the parties on a joint account you are on the hook to see that the debt is paid. Any joint accounts will appear on both you and your spouse's credit report.
• Authorized User.  When you open a credit account you have the ability to assign authorized users for the account. Because the account is an individual account you are the responsible party for paying the debt not the authorized user. However, the account will be reported on the authorized user's credit report as well.

Handling credit accounts during divorce

While your credit report may seem insignificant as you go through a divorce it is important to keep an eye on it to avoid unfortunate situations that could ultimately inhibit you in the future.

• Maintain accounts.  Make sure you continue to pay any accounts that are individual or joint even if you haven't been awarded the divorce decree yet. Failure to do so will cause your accounts to become delinquent and begin to tarnish your credit.

• Close joint accounts.  To avoid further charges to your joint accounts, close them. You will still be responsible for the debt but can avoid having further charges made to the account.  Or, if you would prefer to keep the account have the creditor turn the account into an individual one. It is important to note that you can request the account be changed to an individual one but it is at the creditor's discretion. They may require you to re-apply for credit on your own.

Updating your information on your credit report

Most likely your personal information will change following a divorce; new address, and possible last name change. You need to be diligent in making sure this new information is relayed to both your creditors and the credit reporting agencies.  Not that they won't take your word for it but, you may be required to supply the below information so be prepared.

• Court documents for legal name change
• Valid driver's license
• Copy of Social Security card reflecting name change

The responsibility is still yours 

You are still legally responsible for individual and joint accounts in your name even if your ex agrees to pay the debt in you divorce settlement.  As I mentioned earlier your creditors don't care about who took responsibility for what debt or what your divorce decree says. 

To protect yourself keep your eye on your accounts and make sure they are being paid regularly; don't let your ex bring you down with them. 

Have you been faced with a divorce and joint debt your ex didn't pay, share your story! 

Suzanne Cramer

Suzanne is a certified credit counselor for CareOne Debt Relief Services and is a Social Media Specialist. Suzanne supports our Ask the Expert forums as a coach and writes for our A Straight Talk on Debt and Divorce, Debt and Finances blogs. You can also follow Suzanne on Twitter where she shares the latest debt industry news, and tips to keep your finances in check with her @AskCareOne and @ADivorcedMom accounts.