When it comes to divvying up joint accounts or coming to a financial agreement about joint payments during a divorce in Virginia, you may find yourself worrying about the effects this process will have on your credit score. You may face hefty expenses from the divorce proceedings, including alimony or child support, and you also need a way to finance yourself as you begin this new chapter in your life.
The good news is that divorce proceedings will not affect your credit—at least not directly. However, according to U.S. News & World Report, you need to be aware of the indirect ways the separation can damage your credit score.
Perhaps the most obvious influence on your credit is the high cost of divorce. Of course, not all separations come with a steep price tag, but when they do, they can be financially devastating. Custody litigation can ring in at more than $20,000, and if you do not have significant funding readily available, you may find yourself borrowing or missing payments to try to come up with the money.
If you cannot pay the bills and find yourself in debt as a result of divorce, your credit score will suffer. High bills for legal services, alimony, child support and accrued interest or penalties may raise red flags for lenders, making it difficult for you to gain approval for car loans, mortgages, property rentals and credit cards.
Amicable ex-spouses may be able to come to a healthy financial arrangement regarding joint credit accounts, but a vindictive or indebted partner can spell trouble. Even if you make your payments on time, your ex-spouse’s refusal or inability to pay up can have a negative impact on your credit score.
By staying in contact with lenders, you can minimize the damage. In cases where your ex is not holding up his or her share of the payment bargain for joint credit accounts, you can switch the account to your name by removing the other person or closing and then re-opening the account. You can also freeze the account until some agreement has been reached.
When you are facing significant post-divorce debts, careful financial planning is in order. You may not be able to live your old lifestyle, and you might need to pare down your spending significantly. Nevertheless, the post-divorce financial topography is not all grim. This is your chance to take control of your own assets, become a better financial manager and even rebuild your credit.
This information is intended to be educational and should not be construed as legal advice.