August 31st, 2009
Till Death do us Part – Even Your Credit Score?
“Till death do us part, in richer and in poorer, in sickness and in health” – sound familiar?
Of course it does, this being the standard for wedding vows, the verbiage of marital commitment and a decree of unity which is suppose to outline the future. In today’s world of “two out four marriages ending in divorce,” someone might want to add a standard to this, such as “with a low TransUnion score, in mortgage denial and high APR, and in credit distress.”
Maybe this would help those who either marry into a partnership of credit foul or become one of the “two” of the “four” that find themselves navigating divorce. And then there are those who have great credit, only to find that also separated from them at the time of their marital collapse, they are divorced of their high credit worthiness, or are in a state of splitsville from the ability to secure a loan.
This is not to say that in contemplating divorce that the two should consider how their credit will be effected and possibly stay together for the benefit of their credit, but if and when divorce becomes your option of choice it is wise to know how your credit will be effected. Fact is, when credit and divorce are mixed nothing good is made.
It is not that divorce itself will plummet a credit score as much as it is the byproduct of divorce which does.
It is more due to the inherency of neglect, lack of communication, maliciousness and the absence of responsibility – all characteristics which most often times are those which created the divorce to begin with.
It is these aspects which destroy credit. The only option in avoiding this is to remain vigilant after the divorce.
Make sure personal credit is monitored and all obligations are continued to be met. In fact, during (or before) the divorce, you should figure out who will be accountable for what debts. Most importantly both sides need to know what it is they need to take care of.
When dividing debts, it seems logical to have the user of the asset the responsible party, for example, if there is a home mortgage and an auto loan, whoever will live in the house should take care of the home mortgage and who ever will drive the car should take care of the auto loan.
In doing this the person responsible for the asset is then given an incentive to keep the debt current. Of course this is all assuming that the divorce is done under amicable circumstances.
Sadly, that is not typical the case and when a divorce turns ugly it is all too tempting to ‘forget’ to make loan payments on a spouse’s car, mortgage, or other similar assets and wait for the car to get repossessed, the house foreclosed, and the furniture returned. Of course, this strategy would damage both sets of credit, and surely, as tempting as it might be, is not a good strategy if securing a loan in the future is ever a goal again.
Most importantly, different states have different strategies for the handling of assignments of debt. When the divorce process has begun, meaning the decision has been made, it is crucial to seek the advice and counsel of a qualified divorce attorney who knows the pertinent state divorce laws. It could be surprising to learn how debts are handled and how they affect support payments and the division of assets.
Finally, after it has been decided who will pay for each of the debts, update those accounts with the lenders. If divorce is the only option, steadying a personal credit score is as much a priority as who gets the dog and who keeps what car.
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