Divorce can be a challenging time, both emotionally and financially. It often brings significant financial shifts, and maintaining good credit is crucial for establishing independence. Damaged credit can impact your ability to rent a home, secure loans, or even open utility accounts on your own. Here are key tips to help you navigate the process and protect your credit.

Open Individual Credit Accounts

If you and your spouse share credit accounts, open individual accounts early in the divorce process to start building financial independence before joint accounts are closed. Having separate accounts provides a safety net, ensuring your credit score isn’t impacted by any missed payments or other negative actions on joint accounts by your spouse. For example, if you have only a shared credit card, you could open a new one in your name to build an independent credit history and prepare for separation.

Monitor Your Credit Reports Regularly

Stay vigilant by checking your credit reports frequently from all three major credit bureaus: Equifax, Experian, and TransUnion. Divorce proceedings can sometimes lead to unexpected changes in credit activity, so it’s wise to keep an eye out for any errors or unauthorized activity. Keep in mind that divorce proceedings can lead to unexpected activity. For example, a shared account might show increased balances or missed payments if not monitored closely. Regular monitoring can help you catch problems early, giving you time to address any issues before they worsen.

Close or Separate Joint Accounts

Joint accounts can create long-term liability, so it’s ideal to close them if possible. By closing joint accounts, you remove the risk of being responsible for debt your spouse incurs after the separation. If closing the account isn’t an option, see if you can convert it to an individual account in one person’s name or remove your spouse as an authorized user. For example, if you share a credit card, request that the card be closed or that one name be removed to ensure future purchases don’t affect your credit.

Proactively Communicate With Creditors

If you foresee any challenges in making payments due to the financial strain of divorce, reach out to your creditors early. Explain your situation and ask about possible options such as temporary hardship programs or modified payment plans. Explain that you’re going through a divorce and want to explore temporary payment options. Many lenders are willing to work with you if they understand your circumstances. Proactive communication can help prevent late fees or negative marks on your credit report.

Update Your Personal Information

Make sure your creditors and the credit bureaus have your up-to-date contact information, including your address, phone number, and email. This ensures you’ll receive all important notifications and bills. For instance, if you’ve moved out of the shared residence, updating your address with creditors prevents bills from going to your old address, reducing the risk of missed payments.

Divide Debts Responsibly

During the divorce process, work with your attorney and spouse to clarify who is responsible for each debt. This step can help avoid disputes down the road and reduce the likelihood of any missed payments. While the divorce decree may assign debts to one party, it doesn’t change the original agreement with the lender. Missed payments on a shared car loan can hurt both parties’ credit, even after a divorce decree assigns responsibility. For example, if both of you are listed on a car loan, the lender can still hold both parties responsible unless you refinance or pay off the debt.

Be Cautious With New Credit

Applying for new credit during a divorce can impact your credit score negatively, especially if your financial situation is uncertain. Applying for new credit can impact credit scores through hard inquiries, especially if financial stability is uncertain. Instead, focus on managing existing accounts responsibly. Opening new credit lines could also complicate the division of assets and debts, making it harder to finalize agreements. It’s best to wait until the divorce is finalized before making any new credit decisions.

Consider a Credit Freeze

If you’re concerned about identity theft or unauthorized credit activity during this time, consider placing a credit freeze with each of the three major credit bureaus. A credit freeze prevents new accounts from being opened in your name without your direct approval, offering an extra layer of security. Freezing your credit is easy to set up and can be lifted whenever you need, making it a smart step if you feel at risk of identity theft.

Seek Professional Guidance

Divorce can be financially complex, and if you feel overwhelmed, consult with a financial advisor or credit counselor, preferably those with experience in divorce cases. These professionals can offer personalized guidance tailored to your situation, helping you make informed decisions about managing credit and debt during the divorce process. A credit counselor, for instance, can advise on managing joint debts, budgeting, and avoiding future credit pitfalls.

Divorce can be a challenging and complicated process, but you don’t have to navigate it alone. If you have questions about managing your finances, we’re here to help.