How to Protect Your Credit During a Divorce

Divorce, whether nasty or amicable, can be an emotional roller coaster. It can be a financial roller coaster, as well. Not only can divorce hurt the finances of both parties, but it can be particularly difficult for the spouse who did not handle the money during the marriage.

The good news is that divorce, in and of itself, doesn’t have an effect on your credit score at all. As Credit reporting bureau Experian explains, “divorce proceedings don’t affect your credit report or credit scores directly.” In fact, credit bureaus keep separate reports on you and your spouse -- and always have. This is why your credit scores can be somewhat different, even if most of your accounts are held jointly.

But with that said, divorce can still cause financial issues. Sometimes problems arise when one party has to spend a lot of money on legal fees, leaving them unable to pay bills. Or perhaps one party intentionally ruins the finances of the other by overspending on joint credit cards or other accounts. This, unfortunately, is not unheard of.

So whether you’re divorcing on somewhat friendly terms or fighting tooth and nail, taking these seven steps will help you protect your credit and your financial future.

1. Pull your credit reports

As soon as you separate or even start talking about divorce, pull copies of your credit report. Get copies from all three credit reporting bureaus, Equifax, Experian, and TransUnion. If it has been 12 months or more since you received a credit report from any of those companies, you’re entitled to a free copy of your report. But it’s worth paying a few bucks to pull your report if you need to.

When you receive all your reports, check carefully to make sure you know which debts your name is on. If there are joint accounts that you don't recognize, have a frank conversation about them now.

In addition to pulling your report, you should also monitor your credit score. Keep in mind that your report is a snapshot in time. Rather than pulling a copy of your report every month or so, you can monitor your credit score and credit activity for free with sites like Credit Karma.

2. Take your spouse off as an authorized user

If you have some accounts, such as a credit card, that aren’t joint but you’ve allowed your spouse to be an authorized user, remove your spouse’s authorization. As an authorized user, your spouse could ring up charges on the account but won’t be legally responsible for paying them because the account is in your name. It’s also a good idea to have yourself removed as an authorized user on your soon-to-be-ex’s accounts.

3. Separate your accounts, ASAP

Now, look at your joint accounts. All joint debts -- including debts where you are a cosigner and not the primary borrower -- should be separated as much as possible. The trick is that you need the consent of the lender. You can’t absolve your liability for a debt simply by agreeing with your spouse that he or she will be responsible for the debt.

Another option, if possible, is to use joint funds to pay down joint accounts before your divorce, and then you won’t have to worry about them. Another option is to transfer joint credit card debt to a card that’s in your name, if you’ll be responsible for the debt, or your soon-to-be-ex’s name, if he or she will pay the debt. If you jointly own a house or vehicles, see if they can be refinanced in the name of the spouse who will keep them, or sell the assets and split any profits.

As part of these steps, it is important to consult a divorce attorney before making any moves. Exactly how you’re debt will be handled will be part of a settlement or divorce decree. So you’ll want to make sure any shifting of debt or assets are part of that process.

4. Consider freezing your credit

This may not be necessary if you’re in an amicable divorce, but if things get nasty, you may want to consider it. Because your ex-spouse likely has access to your Social Security number and other vital information, he or she may be able to take out credit in your name, though not legally.

Even though you wouldn’t be ultimately responsible for fraudulent charges, an ex who uses your information to take out new credit could make things really messy. If you’re at all concerned about this possibility before or during a divorce, putting a freeze on your credit should stop anyone from opening a new account in your name. You can do this yourself by contacting each of the credit bureaus. Alternatively, you can pay a company like LifeLock to do it for you.

Just remember to take the hold off your credit well before you need to apply for a loan or credit card.

5. Understand which debts you're responsible for

One thing to be very clear on: a divorce decree doesn’t negate your original contract with a lender. It’s simply an agreement that might tell you who is responsible for which debts. But you’re both still legally responsible for all joint debts, which is why it’s a good idea to separate your accounts as much and as quickly as possible.

Still, make sure you understand what the decree makes you responsible for and get those debts paid off as soon as possible.

6. Keep an eye on the debts your ex is responsible for

While you’re dealing with the debt for which you’re responsible, make sure to keep an eye on joint debt your ex is supposed to take care of. If he or she doesn’t pay debts on time -- or, worse, lets them go to collections -- your credit score will tank, too.

If you notice that your ex is late on one of his or her obligations, call the lender right away. Explain the situation and do what you can to bring the debt current on your own. If it's completely beyond your means, say so. The lender may still work with you and/or your ex to create a more workable payment plan that keeps both of your credit scores up.

7. Budget for your new means

Finally, take stock of your new financial situation soon after your divorce. Many divorcees have trouble adjusting to a new single-income standard of living. The adjustment can be particularly difficult if your ex-spouse was the main breadwinner.

In order to not fall behind on bills and ruin your credit score, it’s time to learn to live within your new means.

If you’re going through a divorce, you need to take care of yourself physically and emotionally as much as possible, but don’t forget to look after yourself financially, as well. The stability of your financial future may very well depend on the credit-protecting choices you make right now.