Divorce can be messy– here’s how to fix some of the problems…
When couples get divorced, a number of factors can have an impact on the credit of both parties. Regardless of your divorce status, outstanding balances on all accounts must be managed and repaid in accordance with the original borrowing terms (no matter how messy it gets); otherwise, you could be held liable– whether the obligations are for joint or individual accounts.
If you have credit problems due to a messy divorce, the first thing you should do is determine whether or not you’re a victim of identify theft, says David Rubinger, spokesman for Equifax. If your ex used your name and Social Security number to take out credit without your knowledge, then they’ve stolen your identity. To the credit agencies, it doesn’t matter if you’ve been victimized by a stranger, a friend, or an ex. Shutting down the unauthorized accounts, filing a fraud report with the police, and telling the credit agencies to place a fraud alert on your account are the first steps to reclaiming your credit.
If, on the other hand, your ex is simply using credit cards that you previously owned together, then the situation is a little bit more complicated. If you’re still registered as a co-owner or an “authorized user” of the credit card they’re using, you’re probably still liable for any charges made on it, explains Experian spokesman Rod Griffin. “If you have a joint account, you’re considered fully responsible for that debt,” he says. Griffin adds that in some states where community property laws are enacted, all accounts opened during marriage are considered joint accounts, regardless of whose name is on them.
The IRS publishes an overview of the tax-related laws in community property states, which includes Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. You can, however, still file a dispute with the reporting agencies, as well as with the store where purchases were made if you don’t believe you should be responsible for the charges. You have the best chance of being successful if you clearly explain the situation and provide reasons why you shouldn’t be liable. The credit reporting agencies have 30 days to investigate and respond– but unless you have a good reason why you’re not responsible for the charges, such as identify theft, then you’re probably out of luck.
Post-divorce credit problems, which are common, usually can be avoided by closing joint accounts. “The safe thing to do is to cancel all the cards and make both spouses get cards in their own names,” says Evan Hendricks, author of Credit Scores & Credit Reports.
The Federal Trade Commission also provides an overview of “Credit and Divorce” that warns divorcing couples that the divorce decrees they negotiate, such as a commitment that one ex-spouse will pay off credit card debt, does not absolve the other ex-spouse from responsibility in the eyes of the credit reporting agencies. Creditors can still demand payment from the other spouse, which can negatively affect credit scores if it goes unpaid.