Residents of Indiana going through a divorce should be aware and prepare for the possible indirect impact it can have on their finances. While your marital status does not directly affect your credit score and history, the after-effects of dealing with joint accounts can have a negative impact on finances if they are treated incorrectly.
Divorce decree versus a contract with a creditor
To understand the possible effects of the end of your marriage on your financial status, you need to understand the relationship between the divorce decree and your contracts with creditors. A divorce decree issued by the court can assign the responsibility of debt to one spouse or the other. However, even if that is stated in the decree if the contract with the creditor includes both spouses’ names, then both are legally liable for that debt, even if they get divorced. This can happen even if one spouse is only listed as an authorized user on the other spouse’s account. If the spouse assigned the debt in the divorce fails to keep up with payments, then both spouses’ credit histories and scores can be negatively affected.
Protecting your credit
Starting a new life after divorce can be difficult, so protecting your credit through the process and beyond is very important. However, you can plan and prevent negative impact by doing a variety of things, including:
• Working with your soon-to-be ex-spouse to pay off and close any joint credit accounts
• Negotiating to have your name or your spouse’s name removed from accounts to turn them into individual accounts
• Checking your credit report consistently to watch out for any negative changes so you can quickly address them
Attempting to maintain a civil relationship with your spouse through and beyond the process can be quite helpful. Parties involved in amicable divorces are less likely to act in a vindictive manner that can hurt both financially.