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Written By: Brandy Miller | October 15, 2016 | No Comments

Getting a divorce will not affect your credit rating directly. However, many couples who are choosing to end a marriage do find their credit scores are affected by misunderstandings or by specific behaviors during a divorce.

To understand how divorce could impact your credit rating, it is important to understand what a credit rating is. Essentially, it is a number between 300 and 850, which estimates your credit worthiness to lenders, some employers and landlords. Your credit score is largely determined by credit bureaus, which work to gather information about customers from lenders, utilities and other businesses. They compile credit reports as well as credit ratings for individuals.

Many things can impact your credit rating, including:

  • How many active loans you have
  • The number of new loans you apply for
  • The amount of debt you carry
  • Your ability to pay your bills and debt payments on time

You will notice factors such as divorce and income levels do not impact your credit rating. However, there are several things that can happen during the course of a divorce which could impact your rating indirectly:

  1. Misunderstandings about joint accounts and shared responsibilities. If you have opened accounts with your spouse — including common or shared loans, cosigned loans and joint bank accounts — it’s important to remember you are both financially responsible for those accounts. If you do not close down joint accounts or change agreements on loans you share, misunderstandings can happen. If a loan is allowed to default or if an account lapses or is overdrawn, both partners may suffer financially because of it.Once you decide to divorce, work with an attorney to quickly separate your finances and to reach an agreement with all lenders and businesses. The sooner you separate your finances, the less likely you are to overlook a payment and harm your credit score.
  2. Vindictive behaviors.Sometimes, one spouse will lash out against their partner financially by charging excessive amounts to a joint credit card or by overdrawing or clearing out a bank account. Unfortunately, such behaviors can affect both partners’ credit rating.
  3. Changes in financial situations.Divorce can have a financial impact on both parties. If one person is unable to meet his or her financial obligations as a result of changes in household income due to the divorce, his or her credit rating may be affected. If one partner needs to apply for multiple loans, credit cards and other financial products as each spouse separates their finances from those of their partner, the credit rating may be temporarily affected, since multiple loan applications can temporarily lower a credit score.It is important to stay aware of how a divorce can indirectly impact your good credit. When you’re rebuilding your financial life as an individual, protecting your credit score is vital. You will need a good credit score to apply for new financing. In addition, if you need to rent, apply for new loans or apply for employment, your credit score may be used by lenders, employers and landlords to determine whether you can be trusted with new financial products, leases or offers of employment. Maintaining a good credit score is an important part of ensuring you stay financially stable after separation and divorce.

The importance of maintaining your good credit score cannot be overstated. If you are undergoing a divorce in Berks County or the Reading region in Pennsylvania, contact Miller Law Group for a consultation. The attorneys at our law firm are family law specialists and would be pleased to consult with you about your options.