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Topics addressed on December 10, 2009:
Separating your credit after divorce
My husband I have had a joint credit report for the last 10 years. Our credit is in good standing, by the way. Now that we are divorcing, what steps do we need to follow to establish our own individual credit reports? Will our positive credit history follow us to our newly established individual reports, or does one person retain the good history and the other start new?
Actually, you already have separate credit reports. A credit report is maintained for each individual, whether married or not. Joint accounts will appear on both reports. If all of your accounts are joint, your report and your husband’s may be identical, but they are separate.
Some services, particularly in mortgage lending, will obtain both reports and merge them into a single report on behalf of the lender. That might be where you got that misperception.
I’m sorry that you are going through divorce. It is a very difficult time, but you can make it easier by closing or separating your credit agreements.
Ideally, you should pay any existing balances and close the accounts. However, each of you may want to keep an account or two in your name only. You want to continue using credit so that you can maintain a current credit history.
The important thing to understand is that the divorce decree does not change the contracts you have with your lenders. The decree is only an agreement between the court and the divorcing couple with regard to who will make the debt payments on each account.
Only the lender can change the contract, and as long as your name is on the contract the account will be reported to your credit history. In order to separate responsibility, you will need to contact each lender and request that they change the credit contract so that only you or your ex-spouse is made responsible for the debt.
In some cases, the lender may not agree to do so. One of the reasons an account is made joint is because only one party cannot demonstrate an ability to repay the debt alone. If the person who wants to keep their name on the account cannot qualify for the debt based on their individual income and credit history, the lender may require that the balance be paid in full before removing one party from the contract.
Be sure you or your ex-spouse continue to make the payments on any open, joint accounts. Failing to do so will hurt both of your credit histories because the late payments will show up in both credit reports.
Although it might be difficult, try to continue communicating about your finances as you go through the divorce process. Working together to separate your financial lives will help smooth the transition for both of you.
Thanks for asking.
- The "Ask Experian" team