Episode 77 of the Divorce and Your Money Show discusses three mistakes that will destroy your credit during your divorce.
Your credit is important. As you are going through a divorce (or before you start), get a copy of your credit reports. Then you will know your financial base. Your credit score is impacted by a variety of factors, and it can affect your entire financial life.
There are three key mistakes, which can have an impact on credit. It is common to have joint credit cards in a marriage. However, your spouse may usually pay the credit card bills or the mortgage, but then he or she stops paying. That will affect you, regardless of what the settlement says.
Too many changes in your credit accounts can and will affect your credit report. Closing accounts, opening accounts, and running credit inquiries all have an impact on your credit report. If you change too much within too a short period of time, it can have a negative impact.
Overspending and borrowing heavily will be a temptation, and it could have a negative effect on your credit. Attorneys and financial experts now accept credit cards as payment, since legal fees can be large. You may have to reduce your normal lifestyle expenses during a period of financial crisis. Failure to do so could result in financial harm. Be sure to monitor and freeze joint accounts, so that your spouse’s lifestyle does not affect your financial life.
Key Learning Points
- Always start with knowing your credit reports and your credit score – before or while you go through a divorce. Knowledge is power.
- Three mistakes that will destroy your credit:
- Not paying for joint accounts. If your name is on it, you will be responsible.
- Making too many changes to your credit accounts in a period of time that is too brief.
- Reckless spending during the divorce process. Reduce your lifestyle, pay your attorneys, and save the vacation for after the divorce.