Understanding Your Credit Profile in Divorce

Divorce is messy. I won’t sugarcoat it.  But it doesn’t need to be harrowing. One of the most important elements of a clean divorce is understanding your credit profile. Many aspects of your life from renting an apartment to securing home or auto insurance, are tied to credit. And trust me, as a financial advisor who has seen many messy divorces, credit can play a major role.

The Importance of Credit Awareness
Do you know what your partner has been doing financially? Many don't. When you’re in the thick of a divorce, you need to take stock of your partner’s spending. The credit card you didn’t know they had? Yes, you will be responsible for that debt.

Joint financial activities can appear on your credit report, and you may be held liable for debts incurred during marriage. So first things first, you need to gain a clear picture of your credit.

1. Review Your Credit Report: Obtain a copy of your credit report from all major bureaus. Analyze the reports for any joint accounts or unexpected debts.

2. Identify Joint Accounts: List joint accounts and work towards closing or separating them. This will protect your credit from any future liabilities.

3. Negotiate Debt Responsibility: If you’re aware of debts incurred by your partner, use this knowledge in your divorce proceedings. Work with your attorney to help you use this as a negotiation point. If possible, get the other side to agree to take on these debts.

4. Consult Financial Advisors: Family attorneys can be great. But they won’t always focus on credit issues. Consult a financial advisor to get a big picture of your credit during and after the divorce.

Why It Matters
There are so many loose ends to tie up during a divorce proceeding. Credit and debt are a big one. If you don’t know your credit profile going into a divorce proceeding it could result in you being found liable for your partner’s debts. Those student loans that were taken out during marriage? Yeah, they’re yours too now.  Understanding your credit profile empowers you during the negotiation and can help with a smoother transition post-divorce. It helps prevent surprises that can really impact your financial future.

If you have questions about understanding your credit profile pre-divorce, please message me here.