Does A Divorce Ruin Your Credit?

When couples decide to part ways, the process of divorce can initiate a cascade of changes, not just personally but financially as well. One concern that often arises during this turbulent time is the potential impact on one’s credit score. It’s a common misconception that divorce, in itself, directly affects your credit.

However, the financial shifts and decisions accompanying the dissolution of a marriage can influence your credit score. Our Chicago divorce lawyers at Gordon & Perlut, LLC, will shed light on this complex issue, guiding you through the financial complexities of divorce.

Joint Financial Obligations and Credit Health

A significant aspect of married life is couples’ shared financial responsibilities. These joint financial commitments become focal points in a divorce, from mortgages and car loans to credit cards. The divorce attorneys at Gordon & Perlut, LLC emphasize the critical nature of addressing these joint accounts early in the divorce proceedings.

Regardless of the agreements reached in a divorce decree, lenders still view both parties as jointly responsible for joint debts incurred together. This means that any lapse in payments on these accounts can negatively affect the credit scores of both individuals, irrespective of who was designated to pay according to the divorce agreement.

The Path to Resolving Joint Debts

Divorce negotiations and settlements often involve the division of both assets and liabilities. The lawyers at Gordon & Perlut, LLC advocate for a proactive approach in dealing with joint debts. This may involve refinancing loans or mortgages under one party’s name or consolidating and paying off shared credit card debts. Such measures simplify financial obligations post-divorce and protect both parties’ credit scores from potential harm due to missed payments or high credit utilization.

Adjusting to a New Financial Reality

Post-divorce, individuals must adapt to a new financial reality, often managing daily expenses on a single income. This adjustment can lead to increased reliance on credit cards, which, in turn, can result in high credit utilization ratios—a critical factor that credit bureaus consider when calculating credit scores. The Gordon & Perlut, LLC legal team advises clients to be mindful of their spending and credit use during this transition. Keeping credit utilization low and making timely payments are fundamental to maintaining a healthy credit score.

Building or Rebuilding Individual Credit

For some, a divorce might mean starting over to build individual credit, especially if most of their credit history was tied to joint accounts. Opening new accounts in one’s name and managing them responsibly is a crucial step toward independently establishing a positive credit history. Our attorneys often counsel clients on the best practices for building or rebuilding credit and achieving financial stability post-divorce.

The Importance of Vigilant Credit Monitoring

In the aftermath of a divorce, keeping a close eye on one’s credit report is very important. Watching for inaccuracies or unauthorized activities on your credit report can help catch and address potential issues early. Should there be discrepancies related to joint accounts or debts that were supposed to be handled by an ex-spouse, individuals may need to dispute these errors with the credit bureaus.

Documentation from the divorce proceedings, such as the divorce decree and settlement agreements, can be invaluable in these situations. The legal professionals at Gordon & Perlut, LLC underscore the importance of diligent credit monitoring and are prepared to assist clients in navigating any disputes that may arise.

A Final Word About Divorce and Your Credit Score

Divorce does not inherently ruin one’s credit, but the financial decisions and changes that come with it can pose significant risks if not managed with care. Through the guidance of experienced Chicago divorce lawyers like those at Gordon & Perlut, LLC, individuals can navigate the financial challenges of divorce, taking proactive steps to protect and maintain their credit health. By addressing joint financial obligations, adjusting to new financial realities, and vigilantly monitoring credit, individuals can emerge from a divorce without lasting damage to their credit scores.

Call Our Chicago Divorce Lawyers to Protect Your Financial Interests

If you are worried about the potential impact on your credit score after divorce and are eager to safeguard your financial future, don’t hesitate to reach out to Gordon & Perlut, LLC. During a divorce, it is very important that you have a comprehensive understanding of your legal options. Contact our Chicago divorce attorneys at 847-329-0101 or 312-360-0250 to receive your divorce consultation and gain clarity on your situation.