Welcome to the twenty-eighth episode of the Divorce and Your Money Podcast. Shawn Leamon, MBA and a Certified Divorce Financial Analyst, discusses how divorce affects your credit score.
Divorce doesn’t necessarily help or hurt your credit score. When you apply for any kind of credit, which could be a credit card, a loan of some kind, a mortgage, or an auto loan, lenders check your credit information and borrowing history. This determines whether you would be a high-risk or low-risk borrower. Having a perfect credit score over 800 makes it easy to get loans and have a low interest rate. A low credit score means you are less likely to get a loan, but you would likely face a high interest rate if you did.
You need to check your credit report, as you are responsible for any account that has your name on it. Joint credit cards, for instance, can hurt your score badly if you don’t remove your name from them following the divorce.
Some important joint accounts to keep track of include a mortgage, credit cards, personal loans, and auto loans. Divorce can also help your credit score if you would no longer be responsible for certain debt. Less outstanding debt would improve terms for your next loan.
Key Learning Points:
- Divorce doesn’t necessarily help or hurt your credit score.
- Find out which accounts have your name on them.
- Stay up-to-date with changes to your accounts.
- Be vigilant about protecting your credit score after divorce.