Divorce can bring many financial changes, including its impact on your credit. While divorce itself does not lower your credit score, the financial decisions made during and after the process can.
Understanding how divorce affects credit can help you protect your financial future, especially in high-asset divorces where financial complexities are greater.
Joint accounts and shared debt
If you and your spouse share credit accounts, both of you remain responsible for the debt even after divorce. Creditors do not consider divorce agreements when determining responsibility. If your former spouse does not pay their share, late payments could appear on your credit report. Closing joint accounts or refinancing debt into individual names can prevent these issues.
High-asset divorce and credit risks
In high-asset divorces, the division of multiple properties, business interests, investment accounts, and high-value assets can complicate credit matters. If mortgages, business loans, or credit lines are jointly held, disputes over payments can negatively affect your credit score. Ensuring that all financial obligations are reassigned or paid off can prevent damage to your credit.
Missed payments and credit scores
Dividing finances during a divorce can make it harder to keep up with bills. A missed payment on a mortgage, credit card, or loan can cause your credit score to drop. This is particularly concerning in high-asset divorces where multiple financial obligations exist. Setting up automatic payments or negotiating new payment terms can help you maintain your credit standing.
Name changes and credit history
If you change your last name after divorce, your credit report should update automatically when creditors report under your new name. However, monitoring your credit report can ensure that all accounts reflect accurate information.
Protecting your credit after divorce
To maintain good credit after divorce, check your credit report regularly for errors. You can request a free credit report annually from the three major credit bureaus. Creating a budget, paying bills on time, and building credit in your name will also help. If necessary, a secured credit card or credit-builder loan can establish independent credit.
For high-asset divorces, working with financial advisors can help navigate credit risks tied to business holdings, real estate, and investment portfolios.