Divorce is a major, disruptive experience in life that changes everything. You will need to adjust your living situation, think about assets, and consider the effects on your credit score. Debts, whether marital or separate between spouses, will need to be reconciled after you split up. 

Without enough information on the topic, or without any planning, divorce could negatively impact your credit score. We’ll go over the ways divorce can lower your credit score followed by some tips for avoiding this.

How Can Divorce Hurt Your Credit?

While many people know that a dissolution of marriage (official term for divorce in Arizona) can impact credit, they aren’t sure exactly how. The divorce itself doesn’t lower your score, but splitting up can bring financial issues along with it that do. Let’s go over some factors that may negatively impact your credit after divorce:

Getting Behind on Bills

Life comes with many expenses and a divorce can make it easy to get behind on payments, hurting your credit score. Communicating with your ex in a civil manner about bills can be stressful and troublesome. You’ll likely be more severely impacted if you were the lower earner in the partnership.

Community Property Laws

Arizona is a community property state, meaning that all property you acquired in the course of the marriage belongs about equally to each partner after divorce. According to rules concerning community property, if your partner took out a loan while you were married, it might count as your debt. If you don’t have the money for this and can’t make payments, you might get sued by the lender and receive a lower credit score.

Unpaid Joint Accounts

If you are (or were) married, you likely had a joint account with your spouse along with a shared credit card, mortgage, car loan, or something similar. Even if you don’t stay with your spouse, you’re still both obligated to take care of your debts. And if your ex doesn’t pay the bill, it can negatively impact your credit score. 

When you get divorced, the decree will often designate that each of you is to take over each account. For instance, you may end up covering the credit card payment and electricity bill, while your ex has to cover the mortgage and car loan. But, if your ex decides not to pay or makes a late payment, it will impact both of your credit scores. You can plan ahead for this by transferring joint accounts to your name or closing them.

Vindictive Spending

In divorces that aren’t amicable, some exes try to punish their previous partner by using their credit card (even as an authorized user) and racking up debt. If they’re legally authorized to use the card, they can do this without any consequences while ruining your credit. One way to avoid this is to never add your spouse as an authorized user, or to remove them as soon as possible once you decide you’re splitting.

Using a Credit Card to Cover Legal Costs

If you use your credit card to cover legal expenses (like attorney fees and filing costs), you might end up with a lower score. If your divorce involves a property dispute or a custody battle, it will impact the complexity of your case and make it more expensive. Just keep in mind that swiping your card to cover these expenses may come back to bite you later if you get behind on bills.

How can You Protect Your Credit During Divorce?

Good credit is necessary for buying a vehicle, starting a small business, or taking out a loan. It’s difficult to attain an apartment lease without a decent score and your employment opportunities may be similarly limited. Since credit takes time to build back up, it’s best to prevent it from lowering in the first place. Here are some tips for doing so: 

Close Your Joint Accounts

If possible, close any open joint accounts immediately. If you can’t close them just yet, protect your own interests by getting monthly statements from your credit company, bank, or lender. That way, you’ll know immediately if there’s a late payment issue and can try to take care of it before the problem escalates.

Keep an Eye on Your Spouse’s Spending

Until you finalize the divorce, your ex will still be able to access charge cards or credit cards that you haven’t closed. If they claim that they will make payments, hold them to their word and check in with them later to make sure they did. Also check with the bank to see that the payment went through in order to protect yourself from increased interest rates, overdraft penalties, and more.

Resist Frivolous Spending

While shopping may make you feel better in the short-term during divorce proceedings, try to be strategic and cautious with your funds. Not only could it hurt your credit score if you end up having trouble paying off your debts, but it’s adding extra expenses on top of an already-expensive process.

Pay Off Your Own Debts

If you can afford it, the best option is to pay your share of your marriage’s community debts without covering your ex’s share. While you might think that it lessens stress to cover what they can’t afford, it’s both financially and emotionally unwise to keep taking care of your former partner. Now is the time to focus on yourself and create a good financial future without worrying about your ex spouse’s financial obligations.

Keep Records

Whether it’s financial statements, utility bills, or divorce paperwork, find a reliable system for keeping records. This will make your attorney’s job easier and make it much easier to keep track of expenses and spending.

Need Help with Your Arizona Divorce?

If you’re going through a divorce, you’re not alone. The process is never enjoyable, even when it’s an amicable split. While it doesn’t automatically hurt your score, separating from your spouse may lower your credit. It’s important to take steps to protect yourself from these consequences and to think about them, even if you still have a happy marriage. 

Speak with one of our divorce lawyers to get answers to your questions about how divorce impacts credit.

To get in contact and receive help with your divorce, give us a call at (480) 467-4348 or fill out a form below.

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