Originally published by The Law Office of Bryan Fagan, PLLC Blog.
If you search for online articles about divorce and finances you could
spend the rest of your life reading through the results and still wouldn’t
have enough time to read them all. Besides children, finances and property
are the biggest and most important issues in a
divorce. With good reason, many people have devoted vast amounts of time and energy
into writing about this subject. You are reading yet another one of those
blog posts right now.
The question remains, however: to what extent will your divorce impact
your finances- specifically your credit score? The reason why people can
write blog post after blog post and article after article is that there
is no one answer that is correct. With all that information out in the
open to review, there is no wonder why so many people still have so many
questions about finances and divorce. Where do you even begin to learn
what is correct and what is not?
In today’s blog post from the Law Office of Bryan Fagan, PLLC I am going
to write about the subject of the impact of divorce on your
credit score. While it is not as if a divorce itself will show up on your credit score,
many issues that are related to divorce will have an impact on your credit
and your credit score specifically.
Financial trouble can be the result of divorce
It doesn’t matter if you have kids or don’t have kids. It doesn’t
matter if you are a man or a woman. Divorce can lead to rough financial
times if you are not careful or set up well for the end of your marriage.
Have you considered the fact that, even though your current financial
state may not be all that strong, having only one income rather than two
can be a huge transition to have to sort through? Your spouse’s
income will be leaving the house after your divorce and you will very
quickly have to adapt to that. Attorney’s fees, missed time from
work to attend court dates and mediation can only increase likelihood
of this potential problem.
When we are talking about your credit score we are considered debts- loans
that you have taken out, credit cards that you have opened up and even
your house’s mortgage. Those creditors don’t care if you are
going through a difficult divorce. The interest is piling up on those
loans throughout your divorce. You may have even had to take out a loan
to pay for your attorney. If you are having to miss payments on these
bills as a result of you going through a divorce then your credit score
will begin to take a slide fairly quickly.
Be aware of any accounts that you co-own with your spouse
Do you and your spouse own any credit accounts in tandem with your spouse.
What about your mortgage? Or a Home Equity Line of Credit (HELOC)? If
so then you and your spouse need to be on the same page during your divorce
as far as which one of you will be paying this loan and how. This is a
big reason why most people going through a divorce will negotiate for
temporary orders that will dictate which spouse will pay what bill during
the divorce. Doing so will avoid miscommunication on the subject of bills.
Difficulties associated with credit and your spouse do not stop even after
your divorce
Keep in mind that just because your divorce has been finalized your credit
concerns will not necessarily come to a screeching halt. Consider that
no matter what your Final Decree of Divorce has to say, you and your spouse
still own those credit accounts together unless you are able to get either
your name or your spouse’s off the account. Sometimes all it takes
is sending in a copy of your
Final Decree of Divorce but often times this will not matter. For example, if you took out a home
loan to purchase a residence with your spouse the mortgage company does
not care about your divorce and how it divided up the debt or property.
All the creditor cares about is that your contract bears the name of you
and your spouse.
In the context of your home you and your spouse can come to an agreement
whereby you are paid an equity stake in the home in exchange for deeding
your share in the home to your spouse. The specific process is not something
I am going to get into in this setting, but understand that most creditors
do not care that you have a divorce decree that divides up debt in a certain
way. Also consider that you and your spouse can divide debt and still
be hurt due to your ex-spouse not paying the debt as agreed. Often times
vengeful or spiteful spouses will behave in this manner.
How to be defensive about your credit after a divorce
If your goal is to maintain a good credit score you need to minimize your
total amount of debt while maximizing the length of time that you have
been diligent and consistent in making timely payments on the debt that
you do have. For many people, the credit score is the be all, end all
of financial success. If you are one of those people here is what you
can do to increase the chances that your divorce will not be a death knell
for your strong credit score.
First off, do not continue your bad habits after a divorce. If your household
income has been able to overshadow bad spending habits to this point then
do not let that problem persist after your divorce. This is especially
important because you now will have less income coming in to service the
debt that you do have.
For example, you may not be able to buy a house immediately. Buying a house
while you are in debt is begging for trouble to come your way. If you
can no longer afford to make the payments on your vehicle it may be time
to sell it and to take out a small loan from your local credit union to
make up the difference. Pay off that loan and buy a cheap, used vehicle
with a small portion of that loan. You may not look good riding around
in it but at least you will not be in debt.
Before your divorce is finalized print out a copy of your credit report
and take a look at it. If there are any debts that you are not familiar
with call the credit bureau and inquire about them. They may not be there
by mistake as your spouse may have opened up a line of credit or taken
out a loan in your name without your permission. The time to address these
debts is before you sign your final orders- not afterwards.
Consider that debt is not a means to building financial stability
If you have not figured it out yet, debt should not be your go-to resource
for accumulating wealth and financial success. Ask super-successful financial
people and I don’t know that you would ever hear that he or she
got there because of the easy credit that they had access to. If anything,
debt has likely held the person back from building wealth even quicker
than he or she did.
Your credit score is not a signal to anyone of how financially stable you
are. On the contrary, it simply tells people how strong of a relationship
you have to debt. If you take out big loans but pay them off on time you
will have a strong credit score but your path to wealth and financial
successful will become stunted. Consider revising your approach to debt
after your divorce so that eventually your credit score becomes nothing
more than a number in your past.
Questions on debt, property and divorce? Contact the Law Office of Bryan Fagan, PLLC
If you have any questions about the subject matter that we discussed today
please do not hesitate to
contact the
Law Office of Bryan Fagan, PLLC. We offer free of charge consultations six days a week with one of our
licensed family law attorneys.
Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.
from Texas Bar Today http://bit.ly/2VWYIaP
via Abogado Aly Website
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