Getting divorced can change just about every aspect of your life: your living situation, your role as a parent… and your credit. In this article, Salt Lake City divorce lawyer Darwin Overson will examine different ways divorce can impact your credit score, and offer some tips on how to protect yourself financially.
What is a FICO Score?
Your credit score is a number expressing your “creditworthiness,” or your ability to pay back loans. Most credit scores are based on a model designed by the Fair Isaac Corp., which is why credit scores are often called FICO scores. A FICO score can range anywhere from 300 to 850. Other, less common types of credit scoring models include VantageScore (300 to 850), PLUS score (330 to 830), TransRisk score (100 to 900), and Equifax score (280 to 850).
No matter which model is being used, one fact stays consistent: the higher the number, the better. Just take a quick glance at these possible FICO score ranges:
- 599 or lower – Bad credit
- 600 to 649 – Poor credit
- 650 to 699 – Fair credit
- 700 to 749 – Good credit
- 750 and up – Excellent credit
Lenders are typically hesitant to accept loan applicants with shaky credit scores, due to the high financial risk involved. That being said, these ranges aren’t perceived uniformly by each and every lender. Some lending institutions have relaxed standards for granting loans, while others are extremely selective. Of course, you should always aim to achieve the highest credit score possible.
U.S. citizens are all entitled to one free credit report from each of the three major credit agencies (Equifax, Experian, TransUnion) every year. As of September 2015, the only website which is federally authorized to provide free credit reports is AnnualCreditReport, not to be confused with freecreditreport.com. You can also call (877) 322-8228 to get a free copy of your credit report.
How to Protect Your Credit During and After a Divorce
Unfortunately, divorce can potentially drive your credit score down (though this certainly isn’t always the case).
There are a few different ways this can happen, but the most obvious cause is probably failing to make payments while the case is ongoing. After all, divorce can be expensive – about $15,000 to $20,000 for the average contested case. (Non-contested divorces are about a tenth of the price, closer to $1,500 on average.) Add in temporary child support and/or temporary alimony, which may be court-ordered while the divorce is still pending (yet to be finalized), and the cost balloons even higher. If these expenses eat too deeply into your budget, your credit score could dip as you fall further and further behind on your payments.
Joint credit accounts, such as credit cards or mortgages, can be another pitfall. If your name is on the credit account shared by you and your spouse, non-payments will appear under your name – even though your spouse was actually the one who didn’t make the payments they were supposed to.
For the time being, just do your best to make the payments, even though you aren’t the one who’s responsible for them. Yes, it’s an unfair and frustrating situation to find yourself in, but take heart: you can report your spouse’s non-payment(s) to the court. If you avoid making the payments on principle, you will simply be cutting off your nose to spite your face, because it’s your credit that will suffer in the end.
By following a few basic steps, you can reduce the risk that your divorce will seriously damage your credit score:
- Make a detailed budget. It sounds like a no-brainer, but people are always shocked to see how the numbers add up on paper. You’ll probably need to make some changes to your normal lifestyle while the proceedings are pending, and having a clear, written budget will help you itemize and prioritize your expenses accordingly.
- Remove your spouse as an authorized user from your credit card. There’s no excuse not to do this, because all it takes is a phone call to your credit card issuer.
- Separate any joint accounts you share with your spouse. Your lenders don’t care about your marital status, but you can bet they care about getting repaid. Contact the lender about closing the account as soon as practicable.
- Watch your credit for strange fluctuations. Numerous companies provide credit monitoring services, some of which you can access for free. Make sure you continually scrutinize your credit for any changes that seem suspicious or out-of-place. If you spot an error or discrepancy, report it to the appropriate agency immediately. It might be an innocent typo – or it might be your spouse racking up debt.
If you’re thinking of filing for divorce in Salt Lake City, or have already been served with divorce papers, it’s crucial to approach the legal process with experienced representation on your side. Alimony attorney Darwin Overson has extensive experience handling complex divorce cases throughout Utah, and will fight aggressively to protect your assets and property rights. To arrange for a free and private legal consultation with our attorneys, call the law offices of Overson Law, LLC at (801) 758-2287 today.