How to protect your credit score in a divorce
The emotional toll of sadness, confusion, frustration, and a host of other distractions that come with divorce are bad enough. Unfortunately, it can get even worse with the unexpected and significant financial burden. It is likely you will lose the stability of a second income and you might have to pay child or spousal support. You know your living expenses will increase and you may well have to make a big change in your home location and perhaps move from a house to an apartment.
But what about your credit? Will your credit score take a hit as a result of a Michigan divorce? Couples involved in a divorce can take some solace that credit is not affected whatsoever through the proceedings; however, the expense related to the process itself has the potential to cause all manner of negative credit scenarios. Your best strategy, of course, is taking proactive steps to keep your credit score from plunging off the edge.
Beware of joint debt
Most married couples combine incomes in the course of their time together and subsequently amass combined debt. This can be a very volatile point of contention during divorce, as couples often share home equity lines, joint credit cards, mortgages, auto loans, and other types of debt burden. While they may well have worked amicably together in managing this debt during their marriage; addressing debt during divorce can quickly and negatively impact credit ratings.
One of the biggest mistakes couples make is relying too heavily on a divorce judgment. For example, if your ex-spouse is deemed responsible for a specific debt, it doesn’t mean you are home free. Let’s say the court states your ex to be responsible for half of your $10,000 credit card balance during marriage. You smartly paid off your half but your ex stopped making payments. You have no idea this is happening until your credit score is blighted from all of the missed payments.
You can try to regain some positive from an event like this by seeking reimbursement through the court but by that time your credit score is forever damaged.
If a divorce is in your future, it is very wise to acquire a copy of your credit report beforehand. Thoroughly review the report for any accounts that demand attention and plan ahead to avert any joint debt. Cancel all joint credit cards and try to pay off outstanding debt before the divorce is final.
In addition to credit cards, be sure to address other debt including mortgage and car payments. Also make sure you are fully removed from assets such as a home and the debt is transferred to your ex. In any situations where you are still jointly liable, always confirm payments are made on time.
It is also a smart strategy to plan a new budget to guide your post-divorce life. Your income and expenses will change and being prepared well ahead of time ensures a smooth transition.
For more information on protecting your credit score in Michigan divorce cases, contact The Gucciardo Law Firm today at (248) 723-5190.
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