Joint, Individual Credit Ought to Be Focus for Divorcing Couples

Divorce can be an extremely unpleasant time for separating couples for a variety of reasons, not the least of which is the havoc that such a process can cause when it comes to dealing with credit shared between both sides, as well as individually.

Making sure credit considerations are accounted for throughout divorce proceedings can be of the utmost importance to the happiness and financial health of both sides, both during the legal process and once it has concluded. That’s because credit issues can affect many aspects of one’s finances, and divorce is already a trying time for many couples. Therefore, any additional stress that may arise as a result of accounts being mishandled or neglected because other things might be on one spouse’s mind should be avoided at all costs.

The best way to ensure this doesn’t happen might be to sit down and come up with a comprehensive plan for how to handle accounts that are held jointly — such as who is responsible for making sure the bills get paid every month as the divorce process is ongoing, as well as what each partner’s financial stake in each may be — as well as taking care to address accounts only in one person’s name.

Taking care of joint accounts

Accounts that are held in both spouses’ names can be a somewhat divisive factor during divorce proceedings for fairly obvious reasons. One might consider the debt racked up on an account to be largely the result of spending by the other, or there may be some dispute about who should be in charge of paying down those balances, particularly if one partner worked while another stayed home. But regardless of who believes what about debt and payment obligations, the fact remains that the accounts need to be addressed to avoid diminishing the good credit scores both might have built up over the course of the now-dissolving marriage.

Taking the time to figure out, for example, how the bills on these accounts will be paid is vital to ensuring that all are addressed on time and in full. Missing even one payment by a single day during the course of proceedings can take a huge chunk out of both partners’ credit scores because it is listed in both of their names, and lenders therefore view them as being equally responsible, with no considerations for marital bliss or a lack thereof taken into account. A missed deadline is a missed deadline regardless of reasons, and because the ability to meet obligations on time accounts for 35 percent of one’s score, that means the damage done to both spouses by a late payment can be appreciable.

In the case of divorce, it might be a good idea for both spouses to obtain balance transfer credit cards in their own names and then decide how to divide up the debt on jointly held accounts before moving those obligations to the new cards. This will effectively untie both sides from these accounts, while still giving them a way to address the debt they may carry individually. Moving the debt to new cards may also come with the bonus of giving them lengthy balance transfer deals of 0 percent interest, which may allow them to reduce their balances more quickly if they make comprehensive payments into those balances.

Handling individual accounts

Of course, there are likely to be other considerations to take into account as well, and one cannot allow their personal obligations, whether it’s credit cards, auto loans, or the like, to fall by the wayside during this process. As with joint accounts, coming up with a plan for meeting all necessary obligations during the course of a divorce can be of the utmost importance to maintaining credit health, because having a good credit score after the process is complete can play a major role in many areas of one’s finances.

For instance, the better one’s score is, not only do their chances of qualifying for a line of credit they might want increase, but also the terms of that account — including interest rates and fees — will improve. That may be important because many people take financial hits during divorce, and as a consequence, it’s important to try to avoid any additional complications that can arise.

Finally, this is also a good time for both partners to make sure they have checked their credit reports closely, to determine whether there are any unfair markings on the documents. If so, their credit score could be dragged down through no fault of their own, potentially resulting in higher borrowing costs. Fortunately, working with a credit repair company may be able to help clear up the issue in an expedient manner, and put borrowers back to where they deserve to be.

Posted in Finance
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