Does Divorce Hurt Your Credit Score?
- Divorce by itself doesn’t hurt your credit score, but all the financial changes that come with the divorce process will probably have an impact.
- The fallout from divorce can cause you to miss paying bills, have a lower household income and feel other effects that can hurt your credit.
- Separating your accounts quickly and monitoring your credit report can help protect your score after a divorce.
- You can also rebuild and improve your credit score over time.
Divorce won’t affect your credit score directly, but it can hurt your credit indirectly in many ways. For example, you might take a hit from closing joint accounts or struggling to pay your bills.
But although divorce can hurt your credit, you also have ways to protect yourself and to rebuild any damage to your score.
How divorce can affect your credit
Credit scores don’t take marital status into account, so the simple fact that you’re divorced will have no effect on your credit.
But there are plenty of financial changes that come with divorce, and these can change your credit score for better or for worse. Here are some of the most common:
A divorce decree is a legal document that lays out the terms of your divorce. It says how joint assets and debt are divided, what spousal or child support payments are due, how child custody is arranged and more.
All of these arrangements can impact your credit. For example, if you end up taking responsibility for a lot of the debt, while also losing household income from the divorce, then your credit score could certainly suffer.
Missed payments on joint accounts
A divorce can lead to disagreements or miscommunications about who is responsible for which monthly bill. Meanwhile, any legal costs from a divorce proceeding could mean there’s less money for those payments.
All of this could lead to missed payments on joint accounts. As long as both parties are listed on the debt, both will have their credit score take a hit, no matter the reason for the late payment.
Closing or settling joint accounts
With divorce, joint accounts are usually either closed, or one spouse is removed.
Closing a joint credit card or other credit account — or just having your name removed — might lower your credit score if it shortens the length of your credit history or limits your credit mix. These are common factors used to calculate your credit score.
Even having a joint loan removed from your credit report can cause a temporary drop in credit score, just as if you paid it off.
But of course, having less debt can improve your credit score. For example, if your name is removed from a joint credit card with a high balance, the boost could be more than the small hit from losing a credit account.
In fact, being removed from credit accounts can be a good thing for your score if you have too many on your credit report to begin with.
Keep in mind, though, that some of these impacts may be temporary.
Spousal or child support
Being ordered to pay spousal or child support doesn’t automatically affect your credit, since these debts don’t show up on your credit report in the same way loans and credit cards do.
But any late or missed spousal or child support payments may appear on your credit report, and this would hurt your credit score just like any other kind of missed payment.
Reduced household income
A divorce usually means changes to your household income. If both spouses are working, then each will probably see their household income go down. The impact can be especially big for a spouse who stays home to care for children.
A reduced household income can make it harder to cover your monthly bills, which might lead to missed payments.
At the same time, your credit card issuer could lower your credit limit to reflect your lower income. If your credit limit gets smaller without a change to your balance, you could end up with a high credit utilization ratio that harms your credit.
Identity theft
Unfortunately, divorce can sometimes bring out the worst in people, and there are cases where one spouse secretly used the other’s credit to take on new debt. While you may be able to have these accounts removed from your credit report eventually, identity theft could hurt your credit score for a while.
How to rebuild credit after a divorce
It can take several years to recover financially after a divorce is final. Here are some steps you can take immediately to help protect your score and improve your credit.
- Separate your finances: Once you decide how your finances will be divided, it’s important to separate your money completely. Close all existing accounts (or have your name removed from them) and open new individual accounts of your own.
- Contact your creditors: If you and your ex-spouse had joint debt, send your creditors a copy of the divorce decree to let them know who will be responsible for making payments. Know that as long as you’re both listed on the debt, the creditor can hold you both equally responsible, so this is critical.
- Pay your bills on time: Even one missed payment can have a heavy impact on your credit score. Though you may be struggling with money during and after your divorce, try to stay on top of your monthly payments.
- Use credit responsibly: Even if your credit score fell after your divorce, you can start rebuilding it by using all your current credit accounts responsibly. Make all of your payments on time, don’t use too much of your available credit and avoid opening too many new accounts.
- Check your credit regularly: During a divorce or any other major financial change, it’s more important than ever to keep an eye on your credit. You can monitor your credit for free with the three major credit bureaus. Make sure your creditors are reporting your new account statuses correctly and look for any signs of identity theft.
- Freeze your credit: If you have any concerns about your spouse (or anyone else) doing something nefarious, it may be wise to freeze your credit to make sure no one can open any new accounts in your name. You can temporarily lift the freeze any time you need to apply for new credit or have a credit check for any other reason.
- Consider credit counseling: If you’re struggling to boost your credit on your own, consider credit counseling for some extra help. A credit counselor can review your financial situation, offer advice to boost your credit score and offer solutions to other money problems.
Frequently asked questions
Every divorce is different, so what you’ll lose will depend on how your divorce decree divides any joint assets. You may have to give up part or all of shared property like your home, your bank or investment accounts and other things of value. Your household income will also be lower if your spouse was contributing to it.
How quickly you can financially recover from a divorce depends on how much your standard of living and expenses change from the divorce, as well as the terms of your divorce decree. A Fidelity Investments study found that a majority of divorced people felt they had recovered from the financial stress of the breakup within five years.
Your credit score doesn’t automatically drop when you get divorced. But because divorce can impact your finances, it can affect your credit score indirectly. For example, closing joint accounts, missing payments or having a reduced household income could all hurt your credit score, at least temporarily.
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