While it can be an incredibly tough time if you’re going through a divorce, it’s important that you get your finances in order.
Your credit history might be the last thing on your mind. But if you have ever taken out joint credit with your partner, your finances will be tied and they will continue to be even if you separate.
Nothing happens until you take action
As you are only financially linked to a partner when you open a bank account or take out a loan or mortgage with them, this won’t change automatically if you divorce.
A joint bank or credit account is one that both of you has signed up to with the lender. If you have a credit card in your name but let your partner use it, this is not the same as a joint account.
If you have joint bank accounts or credit accounts, you should either close them or remove one of your names from the account before you divorce. This reduces the chances that both of your credit histories will be affected if one of you misses a payment or falls behind.
To do this you’ll have to get in touch with each of the lenders or account providers that you both share an account with. You should ask for one of the names to be removed so that either you or your ex-partner are the sole person responsible for the account. If you have more than one credit account, you should both discuss which accounts you would take on.
You have a number of options to consider if you share a mortgage. It’s possible to buy your partner out, or you may come to an agreement between you where one of you stays and you both split the mortgage – perhaps if you and your children are remaining in the property. For more information on what happens to your mortgage after a divorce, head here.
In some cases, the lender might not let you separate your accounts. For example, if you try to keep your name on the account but your credit history is worse or your income is less than your partner’s, you might not qualify for the credit agreement on your own. This is because when you take out joint credit, both of your credit histories and incomes are considered.
Break your credit history ties
When you take out joint credit with someone, his or her name will appear on your credit history - and yours on theirs.
This means that both of your credit histories will affect each other if either of you tries to take out credit – even if you’re no longer together. For example, if your partner has a poor credit history, a lender may turn you away when you apply for a credit card or a loan – even if your credit history is squeaky clean.
To make sure this doesn’t happen, you should apply for what is called a financial disassociation. You’ll have to do this with each of the credit reference agencies, but we’ve done the legwork for you and you can find the links to each application form here: Experian, Equifax and CallCredit.
Keep up communication with each other
We understand that a divorce is never easy, and that separations often take place on bad terms with bitterness between both parties. But while it may be tough to put these feelings on hold, it’s worth looking at the bigger picture when it comes to your credit history.
It may be tough to continue to stay in contact with your ex-partner, but some communication is vital. Remember that you can both suffer later down the line if your finances aren’t separated properly, so try to put your differences aside while you sort out your shared money matters.
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