Many people don’t think about divorce and credit reports. However, if you are considering a divorce, it is a good idea to get a copy of your credit report. Your credit report, and your credit score, which is comprised of the information in your credit report, provide the basis upon which credit decisions are made. If you will need an apartment, a home loan, need to re-do the mortgage in your name only, or will be seeking new or different employment during or after the divorce, your credit report and credit score will become relevant.
Divorce and Credit Reports: Understanding What’s in a Credit Report
Your credit report documents your credit history and other relevant information. It includes your current legal name, as well as other names you have used. For example, if your legal name is Julie Joan Olson, you may also see J J Olson, Julie Olson, and Julie J Olson on your credit report. If Olson is your married name, you may also see Julie Joan Smith, Julie J Smith, Julie Smith, and J J Smith listed on your credit report.
Your credit report also lists your current and past addresses, as well as your current and previous employers. Your credit report also includes:
- When credit was established;
- The amount of credit you have on each account;
- Recent information on balances due;
- Payment history for the last several years;
- Past due accounts;
- Bankruptcies; and
- Unpaid tax liens.
It is important to review your credit report periodically to ensure accuracy.
In addition to accounts in your name, you will also be able to view joint accounts on your credit report. This includes both open and closed accounts. Finally, you will be able to see companies and accounts where you are an authorized signer on the account. This will likely include several accounts you share with your spouse.
Divorce and Credit Reports: Understanding Your Credit Score
Your credit score is based on the facts and circumstances found in your credit report. Specifically, your credit score reflects various factors, including:
- Payment history;
- Types of credit;
- Length of credit history;
- Outstanding balances;
- Recent credit applications;
- Number of accounts; and
- Derogatory remarks, such as collections, tax liens, bankruptcies, or civil judgments.
This is one of the many reasons it is important to periodically review your credit report for accuracy. If you find an error, you may dispute the inaccuracy online with the credit reporting agency. Once reported, the credit reporting agency or agencies must investigate the item within 30 days. You can provide copies of documents that support your claim, as well as the reasons you take issue with what is on your report. You are entitled to ask the inaccurate information be deleted or corrected.
Knowing your credit score also gives you the opportunity to explore ways to improve on your credit score. By paying down balances and correcting inaccuracies, you put yourself in the best financial position as you go forward with your life during and after the divorce.
Divorce and Credit Reports: Using a Credit Report as a Guide
Your credit report provides helpful information about your potential debts and liabilities as you sort through your debts and assets during divorce proceedings. Of course, if your spouse has credit in their name only, this will not appear on your credit report (unless you are an authorized signer on the account). You may be tempted to enter your spouse’s social security number and other information to obtain a copy of their report. Do not do this. Representing yourself as someone else to obtain credit information is a criminal offense. In a perfect world, your spouse will be just as committed as you to ensuring accurate debt information. They will order their own report and share it with you so you have a clear understanding of the situation. If they do not, however, rest assured your attorney will obtain this information through the discovery process.
Divorce and Credit Reports: Protect Your Credit
As a preliminary matter, the account holder for a given debt may or may not be allocated responsibility for that debt in the divorce. In Maryland, assets and debts are divided equitably. Where couples have debt in joint accounts, it is not uncommon for courts to order one person responsible for that debt.
However, you should know the credit card companies will report failures to pay on joint accounts on both your credit reports. Consequently, it is a good idea to either transfer joint accounts into one person’s name or close the accounts. If you have a balance on the account, it is possible you may not be able to remove one of the named account owners.
Part of your credit score is based on your debt to available credit ratio. If closing your accounts results in a higher debt to credit ratio, this can negatively impact your score. There are various actions recommended to increase your credit score, which you should investigate as early in the divorce process as possible. In addition, make sure you continue paying all your bills as the divorce progresses.
If You are Considering Divorce
If you are thinking about divorce, there are many things you need to consider. How you will proceed, dividing up your assets and debts, and how this may impact your credit score, are just a few of the concerns people express when contemplating divorce. At Fait & DiLima, we focus exclusively on family law issues. Our attorneys work with clients to make plans for the future. We recognize money and financial obligations can be a source of stress during divorce. Together, we can work to make a plan that fits the needs of you and your family. Divorce is not an easy process. However, with the right tools, we can minimize the stress. Contact our office today for a consultation.