Protecting your credit during a divorce
Unfulfilled promises to pay bills, the maxing out of credit cards, and a total breakdown in communication can lead to the demise of a spouse’s credit.  Depending upon how finances are structured, it can sometimes have a negative impact on both parties.  Take a proactive approach and create a specific plan to maintain your credit status.   Create a spreadsheet, and list all of the accounts that are currently open.  Have your loan officer pull your copy or pull a free one online.  List creditor name, contact number, the account number, type of account (e.g. credit card, car loan, etc.), account status (e.g. current, past due), account balance, minimum monthly payment amount, and who is vested in the account.

When it comes to your secured accounts, your best option is probably to sell the assets.  This way the loans are paid off and your name is no longer attached.  The next best option is to refinance these loans.  In other words, you buy out your ex’s equity.  The purchasing spouse must qualify for the loan on their own.  Your last option should be to keep your name on the loan.  If you’re not the one making the payment, your credit is truly vulnerable and it’s so easy for you to get hosed.  If you decide to keep your name on the loan, make sure your name is also kept on the title so you’re not stuck paying for something that you don’t legally own. 

Know which spouse (if not both) is vested on your unsecured accounts.  If you are merely a signer on the account, have your name removed immediately.  If you are the vested party and your spouse is a signer, have their name removed.  Close any joint accounts (both parties vested) that do not carry a balance.  Freeze any jointly vested accounts that carry a balance to ensure no future charges can be made to the accounts.  If you do not have any credit cards in your name, obtain one before freezing all of your jointly vested accounts so you may transfer any joint balances into your account, guaranteeing they’ll get paid.

One 30-day late payment can drop your credit score as much as 75 points.  Know that a divorce decree does not override any agreement you have with your creditors.  Regardless of which spouse is ordered to pay by the judge, not doing so will affect the credit score of both parties.