As a family law attorney, a common question clients ask is, “How will the divorce affect my credit score?”
The answer is: it depends. Below I discuss some factors in which divorce may affect your credit score.
The Marital Settlement Agreement (MSA) and Your Credit Score
In a divorce in New Mexico, the Court requires several documents to terminate the marriage:
- Marital Settlement Agreement (“MSA”) – This document details how a divorcing couple’s finances are to be divided, including all the debts and assets of the marriage
- Parenting Plan – This document establishes timesharing and child support between parents when there are minor children from the marriage
- Final Decree of Dissolution of Marriage – This is an Order signed by the Judge finalizing the divorce
- Other documents may be required depending on the case
After a Final Decree of Dissolution of Marriage has been entered, it is important for the parties to the divorce carry out the terms in the MSA. For example, if the MSA assigns a credit card debt to Wife in a divorce, then it is very important that Husband removes his name from the account. Even though they may be officially divorced, if Husband’s name remains on the credit card and Wife defaults on the debt or continues to accrue debt, Husband’s credit score will likely be affected.
How Joint Credit Accounts Affect Credit Scores After Divorce
Another way divorce may affect credit scores is through joint credit accounts. If there are joint credit accounts, these accounts may need to be closed if they cannot be divided. Closing old accounts may have a negative effect on credit scores, but unfortunately, this might be unavoidable.
If there are secured debts in a marriage, such as a mortgage and/or car loans which one of the parties would like to keep, the person may need to refinance the loan to only have their name on it.
Divorce May Improve Your Credit Score
On the bright side, sometimes a divorce can have a positive effect on one’s credit score. If one of the stressors of the marriage is the spending habits of one of the parties, then disentangling yourself from that person’s debt could boost your credit.
If you have questions about divorce or how divorce can possibly affect your financial future, contact a family law attorney or call Pregenzer, Baysinger, Wideman & Sale, PC at 505-872-0505 to schedule an appointment.