You credit score is probably one of those things that you don’t think about all that often. After all, it’s not like it’s something that you need to use very often.
In a divorce, though, I’ve found that it’s often one of the first things that slips. Almost immediately after the parties start to talk about separation, it’s fairly common that they’ll start to let joint obligations slide. Rather than paying off credit card debt, for example, they’ll either miss payments entirely or only make the minimum payment, rather than aggressively tackling their debt the way they normally would.
I’ve also seen a husband stop paying his wife’s credit card, and concentrate all of his money on ‘his’ card – ultimately hurting her bottom line more than his. Even if the debt is marital anyway and is divided jointly between the parties in equitable distribution or in the separation agreement later on, the damage to your credit score is something that we can’t really take into account.
Sometimes, too, because money is a little extra tight – everyone has to hire divorce lawyers, after all – I find that credit card utilizations go way, way up, and things that you’d ordinarily never miss – like the mortgage payment – end up being late or skipped.
It’s a tough time, financially, and in this economy, with inflation the way it is, it’s even tougher. And it may seem like the easy thing to do to use a little bit more credit card here and there, just to keep things going, but it can also be counterproductive to other, bigger goals later on down the line.
I’m not unrealistic. I know that, sometimes, credit cards are the only way that attorney’s fees can be paid. Most people don’t have an extra $2,000-10,000 just lying around, waiting for the day that they decide to get a divorce. For most people, hiring an attorney is a financial stretch. Not only that, but literally every other good and service is also more expensive right now, from a gallon of gas to a carton of eggs and even a haircut or an oil change. Life is expensive, y’all, and I know we’re all feeling it.
And we can’t starve our kids. We can’t change that some obligations pop up – like medical bills – and, in the back of all of our minds, we know those student loan payments are going to come due again some time soon. (Anyone else? No, just me? Okay, cool.)
It’s a scary time, and it’s expensive and scary to get a divorce, too. But I do also want to caution you to pay attention, because chances are very, very good that you’ll need a solid credit score to get out of this without your divorce costing you any more than it needs to. (And low credit scores are one of those things that make divorces cost even more, because it costs you so much more per month to borrow the money you need to make life work!)
You’ll need your credit score to rent a new place, to refinance your current home, or to purchase a new one.
A friend of mine is getting a divorce, and she got a great agreement in place. She has the first right of refusal where the family home is concerned, and can refinance it into her own name. There’s a ton of equity, and she doesn’t have to pay back her husband’s portion of the equity because of the way they offset her interest in his retirement, so it’s not a huge mortgage that she’d be taking on. Even working like she does – extremely part time – she should be able to afford it. Yay! Right? Except not.
Her credit score is too low to get a mortgage.
Her credit score sank because her husband – who earns, like, five times more than she does – stopped making her car payments when she was out on medical disability. Her car was repossessed. (In the meantime, he bought and started paying for a car for his girlfriend; incidentally, he’s a really super thoughtful guy.)
The mortgage was late a bunch, because he bought and is living in another house, and put all the responsibility of the home on her. She spiraled, struggled with mental illness, and couldn’t work; ultimately lost her job because of the weight of the trauma she was suffering from. And it’s not an uncommon story. This kind of thing happens all the time.
So, now, where’ll she go? Who even knows? Because she can’t keep her house (the house her kids have grown up in, the house that’s in their school system, the house that makes it possible for her and her ex to share custody according to their current parenting plan), she has to find another – only she can’t get a mortgage. And you need to run credit to get a rental, too.
Where will she go? I don’t know. And I wish I could help, but there’s nothing a divorce lawyer can do about a credit rating.
I talked the other day about how much divorce costs – and this is a good example of one of those things that costs an astronomical amount, both in terms of actual dollars and in terms of stress and overwhelm and a person’s overall mental health. It can be a tremendously expensive thing, especially if you don’t go into it in the strongest possible position.
So, what would I advise? In this case, it’s a little too late to change much. But I do think it’s important to work with a therapist, to help prevent your trauma responses from overtaking your ability to rationally respond to an already complicated situation. You can’t help that your fight or flight response has been triggered, but you will have to do the best you can to step back, recognize it, and take positive steps forward designed to make sure that your interests are as protected as possible.
Talk, too, to a financial advisor, or someone else. For my friend, it’s a little too late. But if she had gone into negotiations knowing that her credit score was too low to refi, maybe she could have worked something else out. Maybe she could have waited longer to refinance. Maybe her ex could have taken on more debt. Maybe she would have made different decisions knowing what she had to work with.
And, of course, knowing the things that you’re doing that negatively impact your credit score can go a long way too. Each single missed or late mortgage payment shows up, and it’ll make it harder for you to get a new mortgage (and, in a way, a refi is kind of a new mortgage) or to even rent a different place.
With the housing market the way it is (costs being so high, and inventory being so low) it’s a challenging time to find yourself, essentially, homeless.
This isn’t the only place you’ll find that your credit score matters, but it’s a big one. You’ll want to make sure that, in the days, weeks, and months before your divorce is formally finalized, you’re doing all you can to make sure that you’re in the best possible personal and financial position to make solid choices on behalf of yourself and your family.
For more information, to download a free copy of our divorce ebook, or to schedule a consultation, give our office a call at 757-425-5200.
e of the first things that slips. Almost immediately after the parties start to talk about separation, it’s fairly common that they’ll start to let joint obligations slide. Rather than paying off credit card debt, for example, they’ll either miss payments entirely or only make the minimum payment, rather than aggressively tackling their debt the way they normally would.
I’ve also seen a husband stop paying his wife’s credit card, and concentrate all of his money on ‘his’ card – ultimately hurting her bottom line more than his. Even if the debt marital anyway and is divided jointly between the parties in equitable distribution or in the separation agreement later on, the damage to your credit score is something that we can’t really take into account.
Sometimes, too, because money is a little extra tight – everyone has to hire divorce lawyers, after all – I find that credit card utilizations go way, way up, and things that you’d ordinarily never miss – like the mortgage payment – end up being late or skipped.
It’s a tough time, financially, and in this economy, with inflation the way it is, it’s even tougher. And it may seem like the easy thing to do to use a little bit more credit card here and there, just to keep things going, but it can also be counterproductive to other, bigger goals later on down the line.
I’m not unrealistic. I know that, sometimes, credit cards are the only way that attorney’s fees can be paid. Most people don’t have an extra $2,000-10,000 just lying around, waiting for the day that they decide to get a divorce. For most people, hiring an attorney is a financial stretch. Not only that, but literally every other good and service is also more expensive right now, from a gallon of gas to a carton of eggs and even a haircut or an oil change. Life is expensive, y’all, and I know we’re all feeling it.
And we can’t starve our kids. We can’t change that some obligations pop up – like medical bills – and, in the back of all of our minds, we know those student loan payments are going to come due again some time soon. (Anyone else? No, just me? Okay, cool.)
It’s a scary time, and it’s expensive and scary to get a divorce, too. But I do also want to caution you to pay attention, because chances are very, very good that you’ll need a solid credit score to get out of this without your divorce costing you any more than it needs to. (And low credit scores are one of those things that make divorces cost even more, because it costs you so much more per month to borrow the money you need to make life work!)
You’ll need your credit score to rent a new place, to refinance your current home, or to purchase a new one.
A friend of mine is getting a divorce, and she got a great agreement in place. She has the first right of refusal where the family home is concerned, and can refinance it into her own name. There’s a ton of equity, and she doesn’t have to pay back her husband’s portion of the equity because of the way they offset her interest in his retirement, so it’s not a huge mortgage that she’d be taking on. Even working like she does – extremely part time – she should be able to afford it. Yay! Right? Except not.
Her credit score is too low to get a mortgage.
Her credit score sank because her husband – who earns, like, five times more than she does – stopped making her car payments when she was out on medical disability. Her car was repossessed. (In the meantime, he bought and started paying for a car for his girlfriend; incidentally, he’s a really, super thoughtful guy.)
The mortgage was late a bunch, because he bought and is living in another house, and put all the responsibility of the home on her. She spiraled, struggled with mental illness, and couldn’t work; ultimately lost her job because of the weight of the trauma she was suffering from. And it’s not an uncommon story. This kind of thing happens all the time.
So, now, where’ll she go? Who even knows? Because she can’t keep her house (the house her kids have grown up in, the house that’s in their school system, the house that makes it possible for her and her ex to share custody according to their current parenting plan), she has to find another – only she can’t get a mortgage. And you need to run credit to get a rental, too.
Where will she go? I don’t know. And I wish I could help, but there’s nothing a divorce lawyer can do about a credit rating.
I talked the other day about how much divorce costs – and this is a good example of one of those things that costs an astronomical amount, both in terms of actual dollars and in terms of stress and overwhelm and a person’s overall mental health. It can be a tremendously expensive thing, especially if you don’t go into it in the strongest possible position.
So, what would I advise? In this case, it’s a little too late to change much. But I do think it’s important to work with a therapist, to help prevent your trauma responses from overtaking your ability to rationally respond to an already complicated situation. You can’t help that your fight or flight response has been triggered, but you will have to do the best you can to step back, recognize it, and take positive steps forward designed to make sure that your interests are as protected as possible.
Talk, too, to a financial advisor, or someone else. For my friend, it’s a little too late. But if she had gone into negotiations knowing that her credit score was too low to refi, maybe she could have worked something else out. Maybe she could have waited longer to refinance. Maybe her ex could have taken on more debt. Maybe she would have made different decisions knowing what she had to work with.
And, of course, knowing the things that you’re doing that negatively impact your credit score can go a long way too. Each single missed or late mortgage payment shows up, and it’ll make it harder for you to get a new mortgage (and, in a way, a refi is kind of a new mortgage) or to even rent a different place.
With the housing market the way it is (costs being so high, and inventory being so low) it’s a challenging time to find yourself, essentially, homeless.
This isn’t the only place you’ll find that your credit score matters, but it’s a big one. You’ll want to make sure that, in the days, weeks, and months before your divorce is formally finalized, you’re doing all you can to make sure that you’re in the best possible personal and financial position to make solid choices on behalf of yourself and your family.
For more information, to download a free copy of our divorce ebook, or to schedule a consultation, give our office a call at 757-425-5200.