Home > Credit Score > My Divorce Ruined My Credit!

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Over the years we’ve received an incredible amount of email from people who have gone through a divorce. Their story is almost always very similar. They’ve all had their credit destroyed because of their divorce and they didn’t see it coming. Here is an example of one of the divorce-related emails:

Subject Line: Credit Disaster

I was divorced a few years ago. I was raising our children, so I wasn’t working outside of the home full time. As part of the divorce settlement, my ex-husband has the home and was supposed to have refinanced it within 90 days of the divorce. He was supposed to refinance it into his name so that it would get my name off of the mortgage loan.

He did not do what he was asked to do and the home went into foreclosure a few months later. I didn’t realize it at the time, but the late payments and eventually the foreclosure were being reported on my credit reports, all three of them. Up until then, I had great credit and great credit scores. Now I have horrible credit and horrible credit scores.

My credit is ruined. When I called the mortgage company and explained that the court ordered that he pay the mortgage and refinance it, they told me that they don’t recognize the court’s order. How can that be true?  I thought the court was the boss.

I finally found a job earlier this year but my bad credit almost prevented me from getting it. I guess my employer can also look at my credit reports? 

How could I have prevented this from happening?

We’ve gotten emails from women who have had the same story with credit cards, auto loans, and home equity accounts. They all assumed that because the court ordered their ex-husbands to pay the accounts that they were in the clear. Unfortunately, they all found out the hard way that what the courts say doesn’t really count for much.

Here’s the deal: the divorce decrees do not supersede the original contracts with your lenders. That means that just because the court orders one of you to pay a loan obligation, it doesn’t release the other spouse from liability on the account if it was originally opened as a joint or co-signed account. The lender doesn’t recognize that order as an amendment to the contract that both spouses signed. Both parties are still as equally liable as when the account was opened.

Since both parties are liable, it’s likely that the account is being reported on both individual’s credit reports. And, if the account goes delinquent, regardless of the reason,  the delinquencies will be reported on both spouse’s credit reports. This will severely damage the credit reports and credit scores for up to 7 years.

It didn’t need to happen. And, it wasn’t expected. So much time and money is spent preparing for and carrying out the divorce and so little attention is paid to the most lingering effects of a divorce: the damage to credit reports.

Not that it’s much help to the nice people who have sent me emails, but here’s how they could have prevented this from happening, or at least reduced the damage.

  1. Refinance any joint installment loans into one person’s name. That means car loans and home loans. Essentially one person will be buying the asset from the other. If your finances don’t qualify you to do this then you’ll want to sell the asset and split the proceeds. It’s easier to divide cash than it is to divide a house.
  2. Close any credit cards that are jointly held. This isn’t a strategy that you’ll want to employ for any other reason other than preparing for a divorce since it could lower your credit scores. Have the credit card issuer re-issue you a card in just your name. That way you’ll have the account should you need it and it will only be in your name.

Do all these things as well in advance as you possibly can since the divorce may get ugly at some point. If and when that happens, it’s very possible you’re not going to get any help from your adversarial soon-to-be-ex-spouse. Get these things done before things deteriorate.

While you go through the process of emotional healing from the divorce, you need to be sure to spend some time healing your credit if it has been damaged. Ignoring the problem won’t make it go away, and you’ll probably need access to credit now that you’re on your own. You can use Credit.com’s free Credit Report Card to monitor your credit and your credit scores as you build them over time.

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  • Juan Doe

    Similar story for me. When I divorced in 2007, my ex-wife was awarded the marital residence along with the obligation to pay the mortgage. I was ordered to sign a quit claim deed, but she was never ordered to either refinance or assume the loan. In 2010, when my alimony payments stopped, she also stopped making mortgage payments. In 2011, she abandoned the house and moved out of state. So, I was left paying the mortgage on a house I couldn’t touch for as long as I could just to preserve my credit. The mortgage is now on its third year of delinquency, and my credit is in the dumps while my ex-‘s credit is unharmed. I have gone back to court multiple times to try to convince the judge either to reverse the original decision or at least order my ex- to sell the property, and have walked out of court empty-handed every time, with the judge always telling both of us to work with each other and the lender to find a resolution.
    The property is in Colorado where we divorced. and I now live in NYC. I am beyond frustrated with this situation. My damaged credit score has prevented me from getting a car loan, credit card, and even a decent roof over my head.
    I’m at a loss.

  • http://www.Credit.com/ Gerri Detweiler

    Ugh – I am truly at a loss here. I’d have to defer to what your attorney recommends, and I’m not sure what the alternative is. I don’t suppose that you’re in a situation where it would make sense to file for bankruptcy and get yourself off of the home loan?

  • http://www.Credit.com/ Gerri Detweiler

    What does your divorce attorney advise? What state do you live in?

  • JamesSBurnett1984

    What if the x husband was getting cell phones and auto loans with the x wifes ss number with the x wifes maiden name and the x husband is using his 1st name and the x wifes maiden name insteed of his legal name?

    • http://www.Credit.com/ Gerri Detweiler

      Often creditors are allowed to discuss a debtors debt with a spouse. If they know you are divorced it may be another matter. You may want to either consult a consumer law attorney or file a complaint with the Consumer Financial Protection Bureau.

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