Divorce affects a person's life in countless ways. While custody decisions and changing family lives may be addressed most commonly, another important issue requires attention. Divorce can significantly impact one's finances, in particular credit scores.
Credit scores are not directly affected by the fact that a person divorces, but financial changes resulting from divorce can affect a person's credit score. Here are several financial areas to be aware of when managing finances during and after a divorce.
• Credit card payments: If a credit card is in both spouses' names, consider removing one name from the account so only the spouse who will still be using the card and making payments on the account will be held liable for late payments.
• Mortgage: Unlike with credit cards, removing one spouse's name from a mortgage loan is not an easy solution. If the couple decides that one spouse will continue to live in the home and make mortgage payments, the other spouse's name will remain on the loan until the house is sold. This means that if payments are not made, both spouses can be held accountable. When the house is eventually sold, the couple will split the proceeds of the sale.
• Cars: Car loans are more similar to credit cards. Couples can switch the loan and title so only the spouse retaining the car will be listed as the owner and held responsible for payments.
While managing these financial changes during and after a divorce is important, there are other steps couples can take to ensure the safety of their financial lives. For instance, consulting an attorney during the divorce process can help ensure property division does not affect the couples' financial lives negatively after divorce.
Source: MSN Money, "How divorce affects your credit," Aug. 9, 2012