Dividing debt in divorce so you can build your own credit history

In a divorce, marital assets are divided. The same goes for marital debts. The division of debts is the beginning of building a strong credit history for yourself as an individual.

So much of your life is affected by your credit rating. Auto loans, mortgages, insurance rates and even getting an apartment can depend on your credit report and score. The lower your score, the higher interest rates you pay.

Your spouse may not have been diligent with credit during the marriage. For many people, divorce can be a welcome opportunity to build a new credit rating separate from your married credit identity.

Your spouse may not have been diligent with credit during the marriage. For many people, divorce can be a welcome opportunity to build a new credit rating separate from your married credit identity.

Divorce doesn’t automatically terminate your joint accounts

During your divorce, you will either negotiate the division of your property and debt or a judge will direct the division for you. The judge will do this on what is called an “equitable” basis, which may or may not be an equal split.

Any joint accounts will be divided, but that does not happen automatically. As long as you are named on the account, you are legally responsible for paying it. This is true even if your spouse fails to make a court-ordered payment. If you do not make the missed payment, your credit will take a hit. This is true for mortgages where you are both listed as the borrower.

You might think that your divorce decree, which is a court order, would be enough to free you of any remaining obligations on joint accounts. Unfortunately, it does not.

Therefore, it is crucial to ensure your name is removed from any accounts not designated to you in the divorce, or to close any and all joint accounts. You should also close or freeze any accounts where your prior spouse is an authorized user. Closing or freezing these accounts protects you from further debt accumulated by your prior spouse.

At the same time, you should resist the urge to pay more than your fair share. It could make sense to pay off a delinquent bill that your prior spouse is actually responsible for. It will depend on your situation and how likely it is that you can collect the money from your spouse. If you think your spouse might not pay off their share of the marital debt, discuss your concerns with your divorce attorney.

The next step is building credit in your own name

As soon as possible, begin establishing an independent credit rating by opening up bank accounts and credit cards in your individual name. Then, access each of your credit rating accounts: Equifax, Experian, and TransUnion. These can each be accessed for free once per year through www.annualcreditreport.com.