Credit scores have the ability to govern many aspects of a person’s life. From securing an auto loan with a favorable interest rate to getting a mortgage, living with a low credit score can cut off access to a wide range of financial opportunities. In a high asset divorce, there are many factors that can affect a person’s credit score. While filing for divorce does not show up on credit reports, actions taken during and after can certainly have a negative impact.
For many people in California, joint debt divided during divorce proceedings is a serious problem. This is because creditors do not care about who a divorce decree says is responsible for repayment. If an ex-spouse is responsible for paying a certain debt per the divorce decree but fails to do so, creditors can come after the other person if his or her name is also on the debt. Nonpayment also negatively affects both people’s credit scores. Making sure that both parties understand their responsibilities and refinancing loans into just one person’s name are both effective strategies for protecting credit scores.
Taking out new debts while trying to pay off old ones might seem counterintuitive, but it is an important part of protecting and building new credit after a divorce. This is an important step for adults whose credit was largely built off of joint efforts and debts with their ex-spouses. However, it is especially important for individuals who do not have much of a credit history. This is often due to a lack of involvement in the family finances and is particularly common among spouses who stayed home during the marriage.
Divorce can indeed impact a person’s financial situation, but it does not have to wreck his or her credit score. Even in a high asset divorce that involves large amounts of debts, individuals can take measured, calculated steps to protect their scores from significant harm. Speaking with an experienced attorney might be helpful for addressing this issue since every person in California has unique financial needs.