Maintaining excellent credit helps people in many ways, such as lowering loan interest rates. New Jersey spouses dealing with divorce may worry about how the proceedings could impact their credit score. A divorce might not directly affect a credit rating, but the proceeding’s aftermath may leave someone with a lower score. Preventive steps could help with keeping a credit rating in a decent range.
Divorce and credit score
Divorce changes the legal status of a married couple to unmarried individuals. Going from married back to single doesn’t alter a credit report. However, many recently divorced persons noted that they suffered a decrease in their credit scores. While the divorce itself did not change the score, new financial obligations might have.
A newly divorced ex-spouse may pay alimony, reducing discretionary income. The same spouse might move out of a house and start paying rent for the first time in years. The combination of rent and alimony might force the spouse to pay for many expenses on credit. As credit card balances rise, credit scores might decrease. That’s one financially worrying scenario that a newly single person may experience.
Other factors that could hurt a credit score
Both spouses might be responsible for the joint debt. Divorce proceedings might leave one or both spouses distracted, so someone doesn’t make a payment. Now, a missed payment affects the credit score.
Closing credit cards might lower a credit rating, too. The debt-to-credit ratio changes when available credit decreases. Shutting off a joint credit card account may create this unintended consequence.
If something adverse happens to a credit score, working to rebuild the rating may be necessary. Making budget changes and paying off debt are two ways to work toward such a goal. Individuals who are unsure about what other steps to take or how to develop a plan could discuss their options with a credit counselor.