Does divorce hurt your credit score? The quick answer is “yes.” But only in some situations.
Your credit score is not automatically affected by your divorce. The Clerk of Court does not notify the credit bureaus that you are no longer married.
Your credit score is hurt when your debts are not paid in a timely manner. At the end of a divorce case, you will probably end up being responsible for some – or all – of the debts in your name as well as some – or all – of the joint debts.
Joint debts are debts that both you and your spouse agreed to be responsible for when you created the account. Examples of potential joint debts are mortgages, joint credit cards (not where your spouse is just an authorized user), car loans, and apartment rentals. Your relationship with the creditor or lender is not affected by your divorce order.
For example, suppose that a Husband and Wife have a joint credit card that they owe $5,000.00 on. They both signed the credit application. If they stop paying the credit card bill while married, both of their credit scores will be hurt. Now assume that when they get divorced, the judge orders the Husband to pay the entire $5,000.00 credit card balance. When and if he stops paying the credit card bill as ordered, both the Husband’s and the Wife’s credit score will be affected. The Wife is not absolved of her obligation to the credit card company by the divorce order. The rights of the lender are not affected by the couple’s divorce case. The credit card company can (and will) try to recover whatever it can from both the Husband and the Wife. This is called joint and several liability.
Now suppose that the credit card, above, was only in the Husband’s name. When the couple gets a divorce, the judge could require the Wife to pay a portion of the credit card balance. If she fails to pay what the judge ordered, her credit will not be affected – since she has no legal/contractual relationship with the credit card company. However, the Wife could be sued by her then ex-Husband for the extra amount he had to pay. Any judgment rendered against her could hurt her credit rating.
If you are thinking about a divorce, consider closing joint accounts in order to minimize the impact to your credit score if your spouse fails to pay what they owe. Also, be on the lookout for unusual activity on your credit card or a joint credit card. Unfortunately, it is common for one spouse to make excessive purchases prior to a divorce.
Lastly, when negotiating a division of your assets and debts, consider taking on a higher amount of the joint debts if you can get a similar amount of the marital assets. If successful, your credit score could only be hurt if you fail to pay the debts.