Divorce Does Not Directly Impact Your Credit Score

Divorce can affect nearly every area of your life, including your financial habits and your overall financial health. Many people worry that divorce will automatically harm their credit score. While that’s not strictly accurate, it’s important to understand the various ways in which divorce can affect your credit profile. Continue reading to learn whether and how your New Jersey divorce can affect your credit score. Call a knowledgeable New Jersey divorce and property distribution attorney with any questions or for help preparing for divorce.

Divorce Does Not Directly Impact Your Credit Score

The good news first: The fact of divorce does not technically affect your credit score. Filing for divorce and obtaining a final judgment are not reflected on your credit report, nor is switching your marital status–your credit report does not state whether you are single, married, or divorced. There are, however, a few ways in which divorce can indirectly affect your credit.

Joint Accounts Can Still Affect Your Credit

When you obtain a final divorce judgment, the court’s order will dictate who gets what property. Property includes both assets and liabilities. If you have an outstanding car loan or home mortgage, for example, the court’s order will assign that asset along with the associated debt to one spouse. The same applies to joint credit cards previously shared by the spouses.

Unfortunately, even though you have a court order assigning the debt to one spouse, creditors see things differently. In the eyes of a creditor, if they issued a credit card to you both, then you are both responsible for the card until the debt is paid. If your joint credit card is assigned to your spouse upon divorce, and they fail to make payments, the creditor will still consider you liable. Missed payments can still affect your credit.

Many divorcing couples choose to close all joint credit accounts and other joint obligations. Financiers, of course, get you coming and going–the act of closing a credit card can also affect your credit score. Closing a credit card technically reduces your total available credit, which is one factor affecting your credit score. However, any damage is likely to be much smaller and more temporary than maintaining an account in arrears; talk to your divorce attorney, your accountant, and other professionals to discuss your options.

Divorce Affects Your Income and Assets

In addition to the effects of jointly owned debts, divorce affects your assets. A substantial portion of your jointly owned property will likely now belong to your spouse. You might also owe child support or spousal support (alimony). Plus, you no longer have the benefit of your spouse’s income. You’ll also need to pay court costs, attorney fees, and incidental costs such as moving to a new home.

To the extent that these changes to your financial profile affect your ability to continue payments on any debts you still owe, your credit could be affected. You may find yourself relying on credit more to compensate, which increases your credit utilization ratio. Refinancing or taking out new loans can lower your credit “age” (meaning you have newer accounts). All of these can impact your credit score.

Missing Child Support or Alimony Payments Will Hurt Your Credit

The fact of owing child support or alimony should not directly affect your credit score. If you miss any payments, however, your credit score might take a hit. Unpaid child support or alimony may be treated as a judgment or collection action, which can damage your score. If you miss several payments, your ex may be able to garnish your wages or put a lien on your property; these things will affect your credit. Make sure to stay on top of your support obligations, and if you are struggling to keep up, talk to your lawyer about seeking a modification or reduction of your obligation.

Call Our Qualified New Jersey Divorce Law Firm For Stellar Advice and Assistance Today

If you need experienced legal help with equitable distribution of property, child custody, separation, divorce, child support, alimony, or other family law matters in New Jersey, contact the Union offices of family law attorney John B. D’Alessandro at 908-964-0102.