Divorce can be complicated and the breakup can significantly affect nearly all aspects of your life. Whether you are planning to file for a divorce or in the middle of a divorce, you want to know how this affects your credit status. Every divorce lawyer in Georgetown, MI agrees that divorce can be quite emotionally taxing. Because of this, thinking about things such as your credit standing at the same time can be difficult. But a good attorney can offer you stable support, so you remain aware of your financial situation during the divorce process.
Theoretically, divorce is not supposed to impact your credit in any way. After all, creditors should not treat you differently because of your marital standing. However, in practice, a tough divorce can cause some financial problems for you and your soon-to-be ex. To resolve a lot of such problems, you need to openly communicate with your spouse. With the right legal counsel, this communication won’t break down. Keep reading to know how divorce might impact your credit:
Missing Payments
In all the chaos that occurs during your divorce, you might fail to make timely payments on your jointly-shared bills. Missed payments can negatively affect your credit. If you cannot communicate with your spouse openly, try to make timely payments or talk to your spouse about closing unnecessary shared accounts.
Increasing Debt
Divorce itself can be costly, especially if you cannot resolve it as quickly as possible. And after divorce, you may not be able to pay down debts due to the loss of a second source of income. You can avoid this scenario if you review your finances in advance and adjust your living expenses. This way, you won’t incur more debt after divorce.
Hidden Accounts
Your spouse may hide some of their assets and debts from you during the divorce. Your attorney can request a forensic accountant to look for hidden accounts.
Reduced Credit Limit
When a creditor discovers your income significantly decreased, they may lower your credit limit. As credit bureaus take into account the ratio of balances when opening lines, you must be mindful of this factor. If a balance hits at least 30% of the available limit, request a balance transfer to a credit card with low interest.
Mortgage Refinancing
If you and your spouse share a home mortgage, you may have to refinance it when you divorce. This hard credit inquiry will significantly reduce your credit rating. So, concentrate on things you have control over such as making consistent payments.
