Credit Scores and Marital Status
There are aspects of both marriage and divorce that can dramatically alter your credit score. While someone’s financial stability isn’t
necessarily the first thing you look at when you decide to get married, it’s definitely a choice that has a long-term influence on how
lenders look at you and your buying power.
Credit Scores in Marriage
If you are married, your spouse’s credit score is taken into account by lenders when you apply for a joint loan or joint account. While
your marital status doesn’t influence your credit score, it’s difficult for some couples to secure a larger loan on a house, for example,
without the additional buying power of a spouse. When applying for a joint loan or account, lenders can ask if you are married, unmarried,
or separated.
But if your income and credit score are sufficient to apply on your own, lenders cannot use your marital status as a factor in the decision
process. This is a law laid out in the Equal Credit Opportunity Act. They are not permitted to even ask if you are divorced or widowed if
you apply for a loan on your own.
Tip: If you anticipate the need to apply for a joint loan, be sure that both you and your spouse are building good credit so you can get
the best rates/terms possible. This means that your spouse’s name should appear on accounts, as well as your own.
Credit Scores in Divorce
Divorce can be devastating financially—particularly when financial obligations for both parties linger after things are finalized. While it
may be very difficult, it’s important to remain as civil as possible so you can make a clean financial split. The following is a list of
things you can do to sever the financial relationship faster and move on with your life:
- Split up existing accounts that need to be kept open. An example of this might be utilities or a car loan. Contact the creditor and
have the debt transferred to the appropriate person.
- Close joint accounts. If this isn’t possible, or it would disrupt an important service, ask the creditor recognize you as the sole
authorized user on the account.
- Stay current on interim joint bills. In the time between closing an account or transferring debt, it’s critical your joint financial
obligations are met on time. If not, it may affect both you and your ex-spouse’s credit score.
Warning: There are cases in which one party decides to incur a lot of new debt before and after the divorce is final. Cancel all accounts
that you can if this happens and write to the creditors. Tell them you are not responsible for this debt. Even though creditors may still
attempt to collect, it should help.
Tip: It may be necessary for you to secure a consolidation loan to pay for your agreed portion of joint bills. This will help you
establish/re-establish your own credit history and may give you some protection against debt you didn’t agree to pay.
Credit History
It’s important that you contact credit bureaus to be sure appropriate credit-building history is placed in your name. You should do this
regardless of your marital status. This is particularly important for a woman if the husband’s name is taken. Your entire credit history
can be lost when taking a new name. Because so much of your credit score is based on your credit history, you should make sure you are
involved in building your own credit, regardless of gender.
Other Factors to Consider
Lenders take into account several things when deciding to do business with you that may be a financial result of divorce. Child support,
alimony, and separate maintenance payments are all things that can be factored in. Also note that late payment on these things can
influence a lender’s decision.
Related Links
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