Couples who go through divorce often go through a property division phase, and one of the most important things an individual going through property division can do is to protect their credit. During this post and the next we will talk about things divorcing individuals can do to protect their credit score.
The first step to protect your credit is to create a post-divorce budget. Do not accept more obligations than you can afford in the divorce agreement. Keep in mind that you are moving from a dual-income household to a single-income budget and that hard choices may have to be made. Among the most important costs to figure out is the cost of housing.
Housing costs include your mortgage payment, home insurance, property taxes and maintenance, or rent. Do not forget to include cost of utilities, phone, cable and internet. After housing costs are figured then look at your other obligations like auto payments, personal loans, credit cards and other insurance costs.
The second step you should take in protecting your credit after divorce is figuring out what you have and what you owe. Couples who have been married a long time forget about what credit cards have been opened or one partner may be unaware of debt and credit because the other partner was in charge of the finances. To get an idea of your debts and credit lines obtain a credit report.
When you receive your credit report label the accounts that are listed as individual, joint or authorized user accounts. An individual account generally means the named person on the account is solely responsible for the debt. A joint account means you and your partner are both responsible for the account, and an authorized user account is an account where the holder of the account allows another person to use the account but the other person is not responsible for the amount.
Be aware that not all accounts will appear on a credit report since some creditors or lenders do not report to credit bureaus. Next time we will continue this discussion.
Source: foxbusiness.com, “How to protect your credit during divorce,” Aug. 10, 2011