Seven Steps to Protect Your Credit During A Divorce
We all hope it never happens to us. The “D” word. Divorce.
It's a sad fact that lots of marriages end in divorce, and sometimes the relationship is contentious and hostile. If you are facing divorce, protect yourself and your finances with these simple tips:
1. Keep detailed records. The first step is to commit to making certain that all financial arrangements and obligations are well-documented. If you end up having problems with a creditor for a debt that is not your responsibility, documentation can help clear the issue up faster and with less effort.
2. Dissolve every joint account. This is one of the biggest mistakes that divorcing couples make. One person will keep a joint account, and the other person finds out months or years later that the account has been paid late or sent to collection. Be aware that divorce decrees do not supersede contracts. In other words, if you and your ex split certain debts in the divorce, but your name is still on the debt, YOU ARE STILL RESPONSIBLE FOR THE PAYMENT OF THAT DEBT. This is a biggie, and can completely tank your credit score and ruin your finances.
Remove your spouse’s name on any accounts that you plan to keep (such as your car, etc). Move the utilities and any other bills into one name. If you share joint credit cards, divvy up the balance and open a credit card in just your name, and transfer the balance over to the new account. BE SURE all joint credit cards are closed.
3. Sell the house if possible. The best idea is to sell the house and split any profits. It is imperative to not walk away from your house with your name still on the mortgage. If selling the house is not an option, the person who ends up with the house needs to refinance it in his/her name alone as quickly as possible.
4. Divide all assets. Split all cash, property, and any other assets during the divorce. Do not share assets with an ex.
5. Be on guard online. An ex can do some real damage when armed with passwords to bank and credit card accounts. The first action should be password protecting your computer and your cell phone (this will ensure your ex does not add a sneaky spyware). Change ALL of your passwords on all of your accounts to something your soon to be ex would not know. Do not use birthdays, anniversaries, mother’s name, dog’s name, or anything else that your former beloved would be able to figure out. Phrases like “bobpleasedie” or “lovereallystinks” probably aren’t good ideas, either. A long password (10 characters or more) with letters in upper and lower case and numbers is the best option.
6. Check your credit report. This is a good all-round rule for everyone. However, it’s especially important after going through a divorce. Pull a credit report every 3-4 months, and scour it to make certain all joint accounts are closed and that there are no accounts you do not recognize. Follow up on any errors and get them cleared up immediately.
7. Change your will and life insurance beneficiaries. When moving on after a divorce, make certain to review all important documents, and implement changes where necessary. Remove the ex’s name from your will and any insurance policies in which he/she is named.
Divorce is never a fun endeavor. However, by being educated about the financial facts and following these simple tips, you can make it much easier to move forward and avoid the financial pitfalls that many people fall into when ending a marriage.