When you’re going through the process of divorce, you’re in the mode of dividing up your assets. BUT (and it’s a big but here) you also have to pay attention to the other side of the balance sheet (Yup, that’s the credit/debt side.).
Just like marriage can affect your credit, so can divorce. Here are nine pitfalls to avoid when it comes to your credit and your divorce.
1. Not Being in the Know
You might not even realize all of the accounts that you share or are joint with your soon-to-be ex-spouse. So, probably one of the biggest mistakes you can make is not being in the know.
First thing you should do is pull your credit report and a copy of your spouse’s credit report so you can compile a list of all of your joint credit accounts. You’re going to need to arm yourself with this information so you can monitor the payments on these accounts (to make sure your spouse continues to make the payments he/she is responsible for making) until you close them and that your spouse does not open any new joint accounts/debts.
In a community property state, such as Arizona and Texas, a spouse is responsible for any debt (even individual debt that is incurred during the marriage). If you live in a community property state, you’re going to want to take note of these credit and debt accounts as well.
2. Keeping Joint Accounts Open
Even in the most amicable of divorces things can change—quickly. The day you decide you’re filing for divorce or calling it quits on the relationship, close all of your joint accounts. You don’t want to be responsible for your spouse running up credit card charges or writing checks off your line of credit.
You’re still going to be responsible for making payments on any joint accounts or loans you have with your spouse so closing these accounts curbs any future spending.
If for some reason you cannot close a joint account, talk to the creditor about freezing the account. This is especially true for accounts that have a current balance. Freezing an account prohibits any future charges to the account, but allows you to continue repaying the existing debt.
3. Stop Making Payments on Joint Accounts
You and your spouse are still responsible for making payments on any outstanding balance you have on joint accounts (even the ones you close). Never stop making your payments on these accounts, even if your spouse does, because non-payment and late payments is the quickest way to ruin your credit and watch your credit score plummet.
4. Waiting for the Settlement to Divide Debt
Divorces can be quick and painless or they can be long and brutal. Things might start out friendly so you think, “Oh, I’ll just wait for the divorce settlement to figure out who is responsible for paying which debts.”
This is the wrong answer.