Divorce and separation often focus on the division of assets: who gets the house? Maintenance for the children? However, many couples must also decide what happens to the debts, in joint and sole names, and ask the question: will divorce affect my credit rating?
Changing the legal status of your relationship does not affect your credit score directly, whether you are moving in, getting married, forming a civil partnership, separating or getting divorced.
However, it is likely that during your relationship you have taken out joint credit, be it a mortgage, a bank account with an overdraft facility, names on a utility bill or a loan. And if this is the case, your credit ratings will affect each other.
When you and your partner apply for credit together the lender will look at both of your credit files and scores. This is because with any joint credit each of you is legally responsible for all the debt and all the payments. So, if one of you cannot keep up with your share of the debt, the other is legally obliged to make the payments.
The shared debt will show up on your credit report (it is usually under the heading financial associations or financial connections).
Once listed, it may mean that in the future their credit report will also be taken into consideration on any future applications you make, even if it is in your sole name. And the association will remain if you have those joint debts. Getting divorced or separating will make no difference.
What can you do?
Until all joint debts are paid and accounts are closed you’re still financially linked, but you do have a couple of options:
Split the debt
If possible, sit down with your ex and get a clear picture of what you owe and who will take responsibility for what. You can then have the joint accounts transferred to the person who is solely responsible for the payments.
Look at your property
Often the biggest asset, you may need to refinance to remove one name from the mortgage or sell the home and divide the proceeds.
Keeping paying the bills
Money is likely to be tight as you separate but keep paying the bills. If you don’t have enough money to keep up payments on your loan(s), credit card(s), bills and mortgage or rent, it’s important to prioritise which you can pay. Don’t ignore your debt problems. They will not go away.
If you are struggling please visit the Money Advice Service website for further information and support.
Removing a financial association
Once you no longer share joint finances you can ask credit reference agencies to remove them from your credit report, this is known as a notice of disassociation. Be prepared to provide proof that your financial connection has ended.
Get in touch
If you are going through a divorce or separation and have debt concerns our highly experienced family lawyers can help. You can get in touch here.