Divorce not only takes a toll on your emotions but your finances, too. Those co-signed loans and shared accounts that were once a sign of your romance now cause you immense stress. While you will figure out certain financial problems in your divorce agreement, a lot of things can happen before then, particularly regarding your credit.
Credit problems can even continue long after your divorce if you do not take care of things now. It is time to review the actions you should take to protect your credit score during divorce.
1. Understand how divorce agreements work
You might assume you will separate your joint accounts the second you sign your divorce decree. Unfortunately, this is not true. Do not let it surprise you when your ex-spouse is making late payments for a shared account months after the divorce ends. These late payments can affect your credit report.
2. Manage your joint accounts
Sometimes it is not possible to refinance or close all shared debts immediately. Large loans and mortgages can especially be difficult to do away with quickly. In this circumstance, try your best to work with your ex to manage the account. If you both work together, you can keep your credit scores from plummeting.
3. Create a sensible budget
Divorce changes a lot of things, including how you spend your money. Do not assume you will automatically halve your expenses. According to financial advice website Bankrate, you should be particularly mindful of housing costs, credit cards, personal loans and car payments. If you are close to your credit limit, you might want to consider cutting things you do not need, such as a premium cable plan or going to the bar every weekend.
When you take these preparatory steps, you can stop your divorce from completely wrecking your credit. Sometimes it is unfortunately not manageable and the debt keeps piling up. If you are in too deep, you might need to consider bankruptcy to reduce or liquidate your credit card debt.