Divorce and your credit score
Divorce can be a very stressful time and involves staying on top of a lot of details. One such detail that is often overlooked is your credit rating, which will impact on your life going forward as a single person. In fact, divorce is often given as a reason for bankruptcy: suddenly you aren’t splitting bills anymore, you are stretching finances over two households, you may have child support or maintenance obligations, or perhaps new expenses such as childcare. Apart from all this, you often have at least one joint account and if debts aren’t paid off, both your credit ratings will suffer. The importance of maintaining a good credit rating can’t be overstated. All it takes is for one late payment to be made, and you may find your credit rating has been negatively affected. And as a new single, you will find you need good credit to set up a new home rental or connect utilities without large bonds, for example.
What can you do to ensure you don’t suffer a bad credit rating, or worse, due to your divorce? Firstly, obtain your credit report. You can get this for free from a number of agencies—see this page for more information: http://www.oaic.gov.au/privacy/privacy-topics/credit-and-finance/how-do-i-get-a-copy-of-my-credit-report.
This will help you establish where you stand and you will be able to monitor your future progress. Joint accounts should be disabled from making further purchases and balances paid down. Even when you are divorced, you are still legally responsible to repay joint debt.
If you are divorcing and have a bad credit rating, is there anything you can do? Yes. You can rebuild your credit rating as long as you are extremely careful paying bills on time, going forward. Remember that the most recent information on your file often has the most impact, so have open active accounts and pay them on time. If you don’t have one, get a credit or debit card in your own name. Low interest balance transfer credit cards can also make a big difference.