One of the most distressing aspects of any divorce is the manner in which the change in family status might affect one's credit standing. Alabama residents need good credit scores to buy homes, purchase vehicles and even to establish utility accounts in their own names. Without the proper degrees of attention and effort, divorce can cause a drop in one's credit score.
One of the most important things for any divorcing spouse to consider is the degree to which he or she is financially entangled with his or her soon-to-be-ex. Many couples share credit cards, bank accounts and loans. Under those circumstances, the financial habits of one spouse can have a significant impact on the credit score of the other. It should also be said that everyone reacts differently to the end of a marriage, and a spouse who has always been careful with money could lash out at his or her partner by making a series of poor credit decisions during the divorce.
The best way to minimize the potential impact of poor financial decisions is to create a high degree of separation between one's own finances and those of the other party to the divorce. In some cases, creditors are willing to work with account holders to alter accounts. One option is for both parties to sign documents that authorize the creditor to place the account solely in the name of one party. Another option is to close the account entirely, which requires full payment of any balance, and reopen the account in the name of one party. If neither of these options is acceptable to the lender, a third option is to ask that the account be frozen until the divorce is resolved.
For many in Alabama, it may seem harsh to take steps to separate finances prior to the legal end of a marriage. In reality, however, doing so is nothing more than a savvy financial move. The end result is a reduced risk of credit score damage to both parties, as well as the chance for each spouse to begin taking an active role in bolstering his or her credit score during a divorce, which will be very important while rebuilding life as a single person.
Source: U.S. News & World Report, "5 Ways Divorce Affects Your Credit", Paul Sisolak, April 14, 2016