Credit and Divorce

Divorce is usually a painful experience. It is best to be aware of how credit issues can add headache to the heartache. Anytime joint accounts are in dispute, splitting them can be unpleasant. In the case of credit card accounts the effects can linger over long periods of time.

For instance, say you are divorced and your spouse, according to the terms, is supposed to pay off a joint credit card account. Suppose he misses a few payments. The divorce decree protects you and your credit report from collections efforts and bad marks, right? Wrong. The creditors will continue to come after the innocent party, and their collections efforts could hurt that person’s credit.

After a divorce, you might want to ask the bank to close a joint account, or an individual account with the ex-spouse as an authorized user. Otherwise, the bank could convert them to individual accounts.Then you might be denied the account when you have to re-apply based on individual credit. A person undergoing divorce should keep an eye on the accounts that are held jointly with their spouses. That person should make payments on time no matter what.

Divorce can take a toll on the economics of each spouse. For instance, due to child care and an often smaller income, one year after divorce women feel a decline of 26 percent in their standard of living.

The website of the state of Indiana recommends that all women establish credit in their own name rather than just rely on their husband. After divorce, a bank overdraft privilege or a secured credit card could be ways to establish credit when there is no record of it.