Divorce may end a marriage, but unchecked credit issues last forever
Rebecca Warren is a certified financial planner professional and certified senior adviser in Mesa. She can be reached at (480) 357-8380 or by e-mail at Rebecca@ WarrenFinancialServices.com.
While Valentine’s Day should be focused on the happy side of love, it’s always important for smart individuals to be aware of the potential money pitfalls of love gone wrong. A divorced couple’s respective credit histories can still be destroyed if one or the other practices poor credit habits during or after the divorce. For example, a failure to remove one’s name from home mortgages, auto loans, credit card balances or home equity lines once a divorce is final can produce significant headaches if an ex-spouse loses a job, runs into medical problems or for any other reasons stops paying on time. Here are some key points to consider if you are planning to divorce or if you are post-divorce and are unsure about how your ex-spouse is handling credit you once held jointly: • Enlist your own financial planner with your own attorney or mediator. Good planners with experience in divorce matters should be able to identify financial issues unique to your situation and guide you as you handle them.
• Demand inspection of each other’s credit reports. It’s very easy to lose sight of credit matters when other immediate issues surface in the breakup of a marriage. However, before a divorce is finalized, it’s important for both sides to review each other’s recent credit history because debt trouble can surface during a breakup and cause problems later. Good divorce attorneys and mediators can draw attention to this need, but couples are ultimately responsible for making this process happen. It’s best for divorcing couples to make time to pull copies of their credit reports and gather those for the same period from their estranged spouse and inspect both thoroughly (with the help of a planner or their attorney if possible). These respective credit snapshots can be used to make decisions that will protect their credit in the future. If both sides haven’t already obtained their annual free credit reports from the three major credit agencies (TransUnion, Experian and Equifax), go to www. AnnualCreditReport.com. • Remove your ex-spouse’s name from your accounts immediately. If you are keeping certain credit card, auto or mortgage loan accounts, both of you should call each lender and follow their respective processes to remove your ex-spouse’s name from those accounts. You may need to coordinate with your ex on all written applications to make sure each account ends up where it needs to.
• Consider refinancing the debts you keep once the divorce is final. Ex-spouses can run into debt trouble and creditors may come after the other ex-spouse for payment if that debt still exists with a history of both names as creditors. That’s why if they’re able, both spouses should immediately refinance the debt from mortgages, home equity loans, credit cards or any other consumer loans that they’re splitting up.
• Keep a continued watch on credit reports and scores going forward. It might make sense to sign up for services that alert you to sudden negatives in your credit data, but above all, set a staggered schedule immediately to check your credit reports in the two to three years following your divorce to spot any erratic credit activity that an ex-spouse might cause. For example, some ex-spouses have been known to place their ex-spouses names on mortgage or credit applications they might not otherwise qualify for. A sharp eye on your credit history can help you identify fraud or other problems.
