Your Credit and Divorce

If you're contemplating going through a divorce, you'll want to look closely at issues involving your credit. Understanding the different kinds of credit accounts and mortgage loan liabilities should help illuminate how to keep yourself from getting into credit difficulties.

Simply trying to rely on the wording of a divorce decree as to who is responsible for existing debts is a surefire way to get yourself into credit trouble. Lenders and other creditors are not parties to such documents and in most states are not bound to abide by them. So if your spouse stops making payments, they are surely to come after you for payment. Knowing how best to proceed ahead of time can save you lots of headaches down the line.

• Individual Account: Your income, assets, and credit history are considered by the creditor. Whether you are married or single, you alone are responsible for paying off the debt.
• Joint Account: Your income, financial assets, and credit history — and your spouse's — are considerations for a joint account. Both of you are responsible for the debt.
• Authorized Users: In some states, both parties are responsible for debts incurred during the marriage.
• Mortgage Loans: Usually involve both parties as co-borrowers with joint liability.

For credit card accounts, the best thing is to pay them off and request closing of the account. The same is true for authorized user accounts. In some cases, the credit card holder may allow the account to be transferred to an individual and issue a new card to the other spouse in their name only. Just don't expect them to automatically transfer account balances or extend the same credit limits.

For mortgage loans, the same may be true depending on the lenders guidelines. Usually the only way to remove a co-borrower from a mortgage is to refinance the debt. And, don't think that by simply recording a quit claim deed you will be released from your obligations. The best course is to contact a lender and take the steps necessary to dissolve the original loan if possible.

For more information on this or other credit issues, please visit Fico Scores or contact us at Metro Mortgage Company. We'd be happy to assist you.

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