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Will getting a divorce affect my credit rating?

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Many people who get divorced are anxious about their finances and the impact divorce will have on their money. There are some obvious changes that a divorce will bring to your budgets, even before the prospect of paying child support figures in.

Each spouse now has to pay his or her own rent or mortgage, as well as his or her utilities, and other expenses that would normally be shared by a couple now must be maintained separately. (Perhaps you and your spouse will divorce on good enough terms to share a Netflix account, but it's probably more prudent to each keep your own.)

One of the more interesting questions about divorce and finances we've seen fielded recently have to do with credit scores. Over at the blog for Collaborative Divorce Texas, where Lisa Vance is a proud member, financial professional Tracy Stewart wrote a thoughtful piece on the topic.

She comes right out and says something reassuring: The act of getting divorced will not affect your credit score. Specifically, as she explains:

The status of your marriage is not a factor in the score calculation. So, hypothetically speaking, your credit score pre- and post-divorce should not change.

In practical terms, though, divorce can have a tremendous effect on your credit score. However, that has nothing to do with the divorce itself - and everything to do with getting into financial trouble.

She notes some missteps that people going through divorce might make that would negatively impact a credit score. Missing payments on your accounts will definitely affect your score, and if your ex misses a payment on a jointly-held account, it can affect the both of you - even if you've determined in a divorce decree that it's your ex's responsibility to pay that bill. She notes that if at all possible, you should complete the divorce with no jointly-held accounts.

She also makes the point we made in our opening in an engaging way, observing, "Your post-divorce budget is not as simple as your pre-divorce budget divided in half." One oft-made observation about a post-budget is you need 30 percent more income after a divorce to maintain the same standard of living as you did before the divorce.

That means three options. You have to actually earn that additional 30 percent, you have to make some hard choices in your budget, or you have to rely on credit to make up the difference. (The third option is obviously a dangerous one that can result in quickly-mounting debt.)

She gives some good advice about how to plan a post-divorce budget, which includes building an emergency savings account. While that might seem hard to do immediately after a divorce, it's important to have in case the unthinkable happens, like losing a job or having a medical emergency that prevents you from working. In those emergencies, married couples can rally and still have income from one spouse; after a divorce, that emergency savings fund is there to help you until you can work again.

Her article's definitely worth reading; while it's reassuring to know that divorce itself won't impact a credit score, it's good to be mindful of what will.

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