When you get a divorce, it’s very important that you protect your credit score – a good credit score is going to come in very handy after the divorce. Whether you’re applying for a new apartment, trying to rent or lease a home, applying for a mortgage or auto loan, or applying for new credit cards in your name alone, good credit makes life much easier after the divorce.
By its nature, divorce can be a very stressful life event. Sometimes, money matters fall by the wayside during a divorce and that’s when divorcing spouses get themselves into trouble. For example, they forget to close joint credit card accounts and their vengeful spouse racks up thousands in credit card debt. Or, they don’t stay on top of a joint account, such as an auto loan that survived the divorce and when their former spouse defaults on the loan, their credit takes a direct hit.
If you’re going through a divorce or planning on filing, it’s critical that you protect your credit. Here are some tips to help you do just that:
1. Shut down joint accounts now.
Joint accounts are those with your name and your spouse’s name; they are held by the both of you, thus you’re both equally responsible for the debt incurred on the account. As long as joint accounts remain open, nothing is stopping your spouse from racking new debt, which you are liable for. If you leave a joint account open and your spouse misses a payment, defaults, or adds more debt, you can be legally liable. Our advice is to close any joint accounts right away, or change them so they are in one spouse’s name alone.
2. Send a letter to creditors about the divorce.
This pertains to closed joint accounts: Send the creditors a certified letter that tells them about your divorce. We advise that you, 1) ask for a current account statement, 2) explain that you do not plan on being liable for any debt incurred after the date of the letter, 3) request that the creditor puts the account on inactive status so your spouse cannot make any new charges, and 4) advise them that once the account is paid in full, it will be closed.
3. Request monthly statements.
If for any reason some joint accounts are left open because they have outstanding balances, it’s important that you insist on having the creditor or lender mail you monthly statements. This way, you can keep close tabs on the account and ensure that your former spouse makes timely payments as agreed.
For more financial advice pertaining to divorce, contact Cutter & Lax. Our Encino divorce attorneys are here to serve you!