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Divorce is a very difficult process. Even the easiest uncontested divorces mess with almost every aspect of our lives. Divorce smashes our dreams and makes us depressed, fearful and distrustful. Although it is very difficult to think about your finances during this highly unpleasant period, it is extremely important for you to protect your credit score and create a financial base for your future.
Finances are usually the most complicated aspect of divorce. You should start planning your after-divorce finances from the moment you realize your marriage is over. In community property states like California or Oregon divorce papers for contested divorce are very complicated to file, and this process also requires you to make huge changes in your financial accounts, which includes: divorcing your joint accounts and abolishing spouse’s authorization for using your credit cards.
Separating joint accounts
You’re liable for repaying any type of debt that’s made in your name. For this reason your divorce won’t be complete, until you separate your joint accounts. This will stop your ex-spouse from investing your joint funds in some shady entrepreneurship project or from buying the latest Nissan GT-R and using it as a midlife crisis cure. Your divorce should be followed with (or even better preceded by) these bank account separations:
1. Joint credit cards
If your ex-spouse built large credit card debt during the divorce process, judge may order them to repay it, but judge can’t influence credit reporting agencies and as long your name is on the account, your credit score will devolve.
You need to close your joint account, but you also need to open a separate credit card account in your own name, because recent account closing also devolves credit score and it may affect your ability to qualify for the new credit card. There’s also an option that enables you to remove your name from the joint account and leave it to your spouse.
2. Credit cards with authorized users
Account owners are liable for repaying any debt that’s made by authorized users of their credit cards. If you are a card owner you should quickly cancel your spouse’s authorization. This type of card can influence your credit history, even if you are just an authorized user. Although the card owner is responsible for the card debt, if some of it is not repaid, even authorized user’s credit score gets devolved.
Joint mortgages are very hard to untangle in case one of the debtors files for divorce. Mistakes made during this process may create disastrous consequences. That’s why mortgage issues should be solved in coordination with a divorce lawyer and financial planner. If you decide to give the home to your spouse, you should also give them the full liability for mortgage debt repayment.
All advices we shared above, require mutual understanding between spouses. Since divorces often get ugly, some divorcees are required to take drastic measures in order to protect their credit score. Imposing security freeze is one of them. It prevents credit reporting agencies from releasing your credit score without your consent. This protects you in case your spouse wants to open an account or take a loan in your name.
If you decide to impose a security freeze you’ll be given a password which can unlock your credit score for future requests. In order to make this freeze functional you should contact each credit reporting agency individually, follow their security freeze procedure and provide all the information they ask.
After your divorce process is over, you can lift your freeze. In order to do this you need to provide: your identification verification, security freeze password and a statement in which you confirm you are lifting the freeze.
People who are going through the divorce, usually don’t worry too much about their credit score, but the chance to continue your life with a clean credit history, which enables you to take future loans is a good enough reason for you to take this matter very seriously. This way you will be able to take a new mortgage or start a new business that will take your mind off the unpleasant divorce experience.
Chloe is a young blogger and a huge fan of social media. She enjoys learning and writing about design, business, psychology and productivity related topics. Her biggest dream is to travel the whole world and take stunning photographs of beautiful places. You can find Chloe on FB and Twitter.