Bay Area Family Law Blog
Guest Post: Protecting Your Credit During Separation
We’re happy to invite our good friend Jim Argo to post this week about credit scores. Jim is a truly talented mortgage broker, and also a hell of a jazz musician. Here’s what Jim has to tell us:
When a marriage or domestic partnership ends in divorce or separation, the lives of those involved are changed forever. During this time of upheaval, one thing that shouldn’t have to change is the credit status you’ve worked so hard to achieve.
Unfortunately, for many, the experience is the exact opposite. Unfulfilled promises to pay bills, the maxing out of credit cards, and a total breakdown in communication frequently lead to the annihilation of at least one person’s credit. Depending upon how finances are structured, it can sometimes have a negative impact on both parties.
The good news is it doesn’t have to be this way. By taking a proactive approach and creating a specific plan to maintain one’s credit status, anyone can ensure that “starting over” doesn’t have to mean rebuilding credit.
The first step for anyone going through a divorce or separation is to obtain copies of your credit report from the 3 major agencies. Once you have this information at your fingertips, it’s time to make a plan.
There are two types of credit accounts: The first type is a secured account, meaning it’s attached to an asset. The most common secured accounts are car loans and home mortgages. The second type is an unsecured account.
In the case of a mortgage, enlisting the aid of a qualified mortgage professional is extremely important. A mortgage professional can help you review your existing home loan along with the equity you’ve built up and then help you to determine the best course of action.
When it comes to unsecured accounts, you will need to act quickly. It’s important to know which person (if not both) is vested. If you are merely a signer on the account, first check with your attorney, and if there are not legal problems with doing so, then have your name removed immediately. If you are the vested party and your spouse or partner is a signer, also check with your attorney, but consider having their name removed. Any joint accounts (both parties vested) that do not carry a balance should be closed immediately if both parties agree.
Ensuring on-time payment of debt which carries your name is paramount when it comes to preserving credit. Keep in mind that one 30-day late payment can drop your credit score as much as 75 points. So, regardless of which person is ordered by the judge to pay the account, any late payments affect the credit score of both parties. The message here is to not only eliminate all joint accounts, but to do it quickly.
Divorce and separation are difficult for everyone involved. But by taking these steps, you can ensure that your credit remains intact.
James Argo
Categories: Divorce, Property, Uncategorized