Divorce changes your life. Not only are you losing your partner, but you must also adjust to a new norm. Among the many impacts of a divorce, your credit score may be affected in the process.
It’s essential to keep your credit health in mind and do everything necessary to protect it. Your divorce lawyer can help minimize the negative financial effects of divorce.
Here is what you need to know about how divorce can affect your credit score in Minnesota.
Understanding Credit Scores
Your credit score is based on your credit history. The number rates your creditworthiness. Scores range from 300 to 850 — the higher your score, the better.
Several factors combine to impact your credit score, including your credit age, how much debt you have, and your repayment history. The goal is to take care of your credit to maintain a healthy credit score. Certain negative actions, like failing to make on-time payments, can cause your credit score to decrease over time.
A good credit score can help you get approved for new credit cards and loans at a lower interest rate. While those with lower credit scores may still receive approvals, interest rates can be quite high.
How Divorce Affects a Credit Score in 4 Ways
Divorce can affect your life in numerous ways — credit score included. Finances play a big role in the divorce process. And certain decisions and behaviors during and after your divorce can impact your credit score, for better or worse.
The following are just four of the key ways a divorce can influence your credit score:
1. Splitting Debts
Property division is one of the most important matters addressed in a divorce. Aside from splitting property and assets, you’ll also divide debt between spouses.
If you entered the marriage with debt, or you take out personal credit cards and loans, you’ll take that debt with you after your divorce is done. Joint debts, however, are different.
A joint debt could turn into one spouse’s sole responsibility, but it may also remain a joint debt for both spouses to repay after the end of the marriage. Additionally, you may be left to take on some of your spouse’s debt, depending on the circumstances.
When you end up with a larger portion of debt than you anticipated, you may fall behind on payments, which could affect your credit score.
2. Dealing With Creditors
Disentangling your joint accounts after divorce can be particularly challenging. While many believe a divorce decree can assist with this, creditors generally don’t care much about it.
A divorce decree is a court document detailing all of the specific terms of your divorce. Even if your decree includes information specifying the splitting of your joint accounts, creditors don’t make it that easy.
For example, if you have a joint loan, your divorce decree may state your ex-spouse is to take over payments until the obligation is satisfied. However, because your creditor likely won’t honor your divorce decree, you’d still technically remain on the hook. Therefore, if your ex-spouse fails to make payments, it could affect your credit.
Depending on the circumstances of your divorce, you may need to refinance. If, for instance, you want to keep your marital home, but the mortgage is in both your names, you’d refinance to seek your own financing and put the mortgage in your name alone.
Seeking an important loan like a mortgage requires hard inquiries on your credit, which impacts your score. And depending on the health of your credit, you may have a difficult time obtaining the financing you need.
4. Handling Extra Financial Obligations
After your divorce, you may face extra financial obligations, like monthly spousal support payments. This requires taking a hard look at your post-divorce finances and creating a budget that fits your income.
Making adjustments to your spending can help ensure you have enough to satisfy your monetary obligations. If you don’t, you could fall behind on payments, taking a hit on your credit score.
Rely on Your Minnesota Divorce Lawyer for Guidance
The financial aspect of a divorce is significant and can cause major stress and frustration. Fortunately, a divorce attorney can provide some much-needed clarity.
The divorce lawyers at Johnson/Turner Legal have extensive experience guiding clients through the financial woes of a divorce in Minnesota. Finances can be tricky to navigate, but we have the skills and resources to pursue the best possible outcome for your case.
Get the legal assistance you need during your divorce. Contact our firm today to schedule your Quick Guidance Call.