In this article:
Going through a divorce is a stressful experience. It can be further complicated by the process of settling certain joint liabilities, such as a mortgage loan. And while a divorce agreement may assign payment responsibility to either partner, the other may also remain financially liable to the mortgage lender.
If you're worried about the loan affecting your credit, you must work with your lender to possibly refinance the mortgage to have it removed from your credit report after a divorce. The credit bureaus cannot remove an account that is accurately reported to them by your lenders. And if you remain liable for the mortgage loan after your divorce, it will remain on your credit reports.
Does a Divorce Decree Remove a Mortgage From Your Credit Reports?
When you go through a divorce, you and your soon-to-be ex-spouse will have to agree on certain aspects of your separation. Part of that agreement will likely be representations or commitments to the court that you will perform certain duties, such as continuing to pay your credit obligations. This agreement is called a divorce decree.
A divorce decree is between you, your ex-spouse and the court. And contrary to popular belief, these decrees do not supersede or override your existing contracts with your creditors. As such, just because the divorce decree assigns payment responsibility for your joint mortgage to your ex-spouse, you're still legally liable for the debt.
Because you are still liable for the debt, the lender or servicer will likely continue to furnish the payment activity to the credit reporting agencies. Since it's on your credit reports, the mortgage loan will continue to be considered by credit scoring systems such as FICO.
What Can You Do to Remove a Mortgage From Your Credit Reports After a Divorce?
The only way to have a current mortgage loan removed from your credit reports is if it is being reported incorrectly and you go through the process of disputing the loan. If the reported loan is legitimate, however, you'll have to have your name removed from the debt as a liable party before it will come off your credit reports. There are several ways get your name off a mortgage loan:
- Refinance the loan. If you're able to persuade your ex-spouse to refinance the loan into just his or her name, then you've accomplished your goal. A refinance would pay off the existing loan and create a new loan in just your ex-spouse's name. Once that has been accomplished, the old mortgage loan would be updated on your credit reports to show as being paid in full, and payment activity would cease. The new loan would not be included on your credit reports, as you would have nothing to do with it.
- Sell the house. This is obviously a more complicated choice because you'll need to find a willing buyer and move out of the house. If you are able to sell the house, you can use the proceeds from the sale to pay off the loan. Once you pay off your loan, it will be updated on your credit reports to show as being paid in full.
- Pay off the loan. This is the most difficult of the three options because it assumes you have the liquid funds needed to pay off a large loan all at once. If you or your ex-spouse pays off the loan, then there is no longer a debt or a mortgage associated with the house because you will own it outright. Once that has been accomplished, your mortgage loan will be updated on your credit report to show as being paid in full.
A Clean Break
After a divorce, despite what your decree may say, you're liable for mortgage debt with your name on it. If payments are not being made as agreed, your credit will suffer and the lender could pursue foreclosure to take your home.
The better option would be to refinance the loan, sell the house or pay off the loan. In any of these cases, you'd no longer be liable for the debt, and the record of the loan would remain on your credit reports in good standing. And that could help your credit scores.