How Divorce Can Hurt Your Credit—and How to Protect It

Divorce is one of life’s most stressful events, and it can have a substantial impact on almost every area of your life. You likely already know that divorce can be harmful to your finances, but you might also wonder: How does a divorce affect your credit report? Here’s a closer look.

Does a divorce agreement directly appear on your credit report?

So how does a divorce affect your credit report exactly? Credit bureaus don’t track your marital status, so your divorce won’t show up on your credit report. It also won’t directly impact your credit score.

Unfortunately, that doesn’t necessarily mean your credit score will remain unscathed. A divorce can cause indirect credit damage if you don’t take proactive steps to protect your finances.

How divorce can indirectly affect your credit

During and after your divorce, it’s especially important to stay vigilant about your credit. These are some of the primary ways your divorce may indirectly cause credit damage:

Joint accounts and shared debt

Married couples can share debt both by opening joint accounts and by adding one spouse as an authorized user to the other’s account.

If you have a joint credit account and your spouse continues to rack up debt, your total credit utilization may increase. This can cause serious damage to your credit score. Similarly, if you’re an authorized user on your spouse’s account, their balances and missed payments can impact your score, too.

Even if your spouse isn’t driving up balances on shared accounts, you could still see an unexpected drop in your credit score once divorce proceedings are over. Most of the time, people have less available credit after divorce. If you have existing debt, that means your credit utilization will increase.

Here’s an example. Imagine you and your spouse have $50,000 of available credit, and you have $10,000 in credit card debt. That means your total credit utilization is 20%.

After divorce, your total available credit drops to $20,000. Even though you haven’t added any new debt, your credit utilization is now 50%.

Missed or late payments during divorce proceedings

During a divorce, it’s not uncommon for one or both spouses to make late payments on joint accounts or miss them altogether. When this happens, both spouses will experience credit score damage.

In some cases, a divorce court will issue temporary orders holding one spouse responsible for certain joint debts. However, because each spouse is liable to the creditor, late and missed payments are damaging to both.

Court-ordered debt responsibility vs. creditor responsibility

In some divorce cases, the court will divide existing debts and assets between the parties. When this happens, both spouses are legally bound by the divorce decree.

But many people don’t realize that creditors are not bound by this divorce decree. Unless a joint debt has been refinanced in one spouse’s name or one spouse has been formally released from the loan, a creditor may pursue both spouses for payment.

So what happens if your ex-spouse isn’t paying their share of debt (as determined by the court) and the creditor comes after you?

If at all possible, you should pay the debt yourself to limit damage to your credit. From there, you or your lawyer can file a motion to hold your ex in contempt of court. When this happens, a judge may order your ex to reimburse you for the debt you repaid and for your legal fees.

If a creditor is harassing you to pay a debt that the divorce court assigned to your ex, it’s also a good idea to communicate the situation to them. The creditor isn’t obligated to stop pursuing you for the debt, but if they understand the situation, they may be willing to pause collection efforts temporarily.

How to protect your credit during and after a divorce

Many people don’t fully understand how divorce and credit reports interact. When you understand how divorce can put your credit at risk, you’ll be better equipped to protect yourself and your credit score.

Here are some key steps you can take to safeguard your finances after a divorce:

Close or separate joint accounts

Ideally, you and your spouse should equally divide funds in joint bank accounts and close the joint accounts. Paying off and closing joint credit cards can also be helpful.

However, this isn’t always possible. If you and your spouse aren’t on speaking terms or you can’t afford to pay off credit accounts right away, you may need the court to step in.

Refinance shared loans

If you and your spouse share a mortgage or car loan, the person keeping the home or car should refinance the loan in their name only. This is often easier said than done, though.

If neither spouse can refinance the loan in their name alone, the best course of action may be to sell the home or car, pay off the loan, and split the remaining proceeds.

Refinancing large loans can be complicated, so it could be wise to consult a divorce lawyer before making any major decisions.

Monitor your credit reports

Even if you feel confident that you and your ex have completely split your finances, you should still regularly monitor your credit report. Look for any remaining joint accounts and accounts you don’t recognize.

Dispute inaccuracies

Keeping an eye on your credit report is just part of the picture. To protect your credit score, you also need to dispute any errors on your report. If a refinanced debt is still showing up as a joint debt or you’re still appearing as an authorized user on your ex’s account, your credit score might be lower than it should be.

Build credit after divorce with Kikoff

If you have divorce and credit report questions, you’re not alone. Divorce is incredibly stressful as it is, and having to monitor your credit at the same time can feel overwhelming. That can especially be the case if divorce-related debt is actively hurting your credit.

Kikoff is here to help people like you take the guesswork out of building credit. When you join us, you can access an interest-free credit line and use it to buy items in our online store. We report your on-time payments to credit bureaus, helping you rebuild credit or establish it for the first time.

That’s just one of the many features we offer. There’s no hard credit check to get started, so sign up today to explore how we may be able to help you.