10 Ways to Protect Your Money and Your Credit Score in a Divorce
10 Ways to Protect Your Money and Your Credit Score in a Divorce
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Protect Your Credit in a Divorce
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Divorce can be unpleasant, particularly if your breakup occurs . There's the emotional sting of dealing with a , the challenges of dating again and starting over as a single person, and of course, financial issues to tackle. Quiz: Unfortunately, money matters can sometimes take a backseat to the personal drama that unfolds during a divorce. If you're separating from your spouse — or plan to — you need to , especially your credit standing. Here are 10 ways to safeguard your credit and finances in a divorce.1 Close joint accounts immediately
Since joint accounts are held by you and your spouse together, both of you are equally responsible for the debt, no matter how it is distributed in the divorce. "If an account is left open, your ex can add more debt, make a late payment, miss a payment or default, and you will also be held responsible," says Bill Hardekopf, a credit expert and CEO of LowCards.com. "The creditor reports account activity to the credit bureau in both of your names. This affects the personal ." Peter Dazeley/Getty Images If you and your spouse are separating, protect your finances to keep your credit in good standing.2 Notify creditors about your divorce
After you close any joint accounts, send a certified letter notifying your credit card companies, banks and other lenders about your divorce. "Ask them to provide a current account statement and tell them that you do not intend to be held liable for any debt accumulated after the date of the written letter," Hardekopf says. "Request that they put the account on inactive status so no new additional charges may be added, and stipulate that once the balance is paid in full, the account is to be closed completely." If your spouse is an authorized user on any of your individual accounts, or you're an authorized user on spouse's accounts, each of you should remove the other from the accounts. This will reduce the risk of either party racking up new, unauthorized debts. Again, revoke the authorization on the account via certified mail.3 Get monthly statements
For any accounts with outstanding balances, insist on getting sent to you. Do the same thing for any accounts you are unable to close or want to keep open for whatever reason. This way, you'll be able to keep track of the accounts and know that timely payments are being made.4 Don t fight tooth and nail for the house
"A lot of times in divorce, especially for women, they want to stay in the marital home because that's where they've raised the kids and they have emotional attachment to the home," says Alan Frisher, head of Sage Divorce Planning LLC and codirector of Florida Alimony Reform, a nonprofit that raises awareness about money-related divorce issues. In times past, clinging to a home post-divorce may have made sense, especially in areas where properties were appreciating and homeowners were building equity. But it's a far different real estate market now. Older Americans, in particular, are often cash-strapped and dealing with big housing debts. "Now, you have to be sure you can really afford the home because it's often more of a liability than an asset," Frisher says. "It's not about who will keep the home, but about who will move on from the home. And that's simply because of the debt surrounding the house."5 Keep your address up to date
If you move out, your creditors aren't the only ones you should notify about your divorce. You should submit a change of address card at the post office or update it online at usps.com. This way, any bills, credit card statements or other financial correspondences addressed in your name alone will be forwarded to your new residence. The last thing you want is to miss a payment on a credit account because you forgot about the bill or your ex didn't let you know the mail was just sitting there in your former home.6 Avoid spending binges and revenge shopping
Unfortunately, some people going through divorce try to get back at a soon-to-be ex-spouse or a former mate by going on big shopping binges. If you're tempted to do this, calm down and rethink this strategy because it's almost always a bad move. "One of the first things I tell both parties is to maintain your normal, current spending habits and not to let debt spin out of control," says Frisher, who is also a Certified Divorce Financial Analyst. If someone spends recklessly while going through a divorce, even though it oftentimes would be considered a marital debt, a judge may look at the spending and order the spouse who wasted the money to assume that debt, Frisher adds. Big credit card bills and other debts could prove difficult to pay off down the road and put your credit in jeopardy in the months and years ahead.Divorce and Money
Estate planning, divorce costs and other financial issues
What happens to your benefits after a split?
More boomers are calling it quits after years of marriage
— Receive access to exclusive information, benefits and discounts.