How Does Divorce Affect Your Credit Rating?


A married couple may think
that they have one credit file but that is incorrect.  Each individual has their own credit file
containing information about accounts or credit events that are linked to their
name.  Many married couples combine their
income when applying for credit.  The
creditor then considers each individual to be 100% liable for the contract they
agreed to.  In these situations, the
credit reference will show up on both individual files.

Who is Responsible?

If two people signed on the
credit transaction, both are 100% liable for the debt until the balance has
been paid in full.  The fact that the
Judge may award that debt to one person or the other does not change the fact
that both are 100% liable.  If payments
are missed, the late payments will show up on both credit reports.

What if I did not sign for the debt,
can I still be held liable?


Wisconsinhas a marital property law.  This law makes each spouse liable for debt
that is taken out in the interest of his or her marriage or family.  It is possible for one person in the marriage to take out the debt, yet both parties will be held responsible for its repayment.  When a transaction is taken
out by only one person, the creditor is supposed to send out a marital property
letter to the non-signing spouse, advising them that they will be held liable
for the debt.  Issuance of that letter
may make the non-signing spouse liable for a debt that they did not agree
to.  This can be a very sticky situation
and it is best to consult with your attorney about any debts that you did not
knowingly agree to.


How do I protect my finances before the

Most marriages have one
partner who takes responsibility for the finances.  Although this can be convenient, it can place
the other partner at a disadvantage upon separation or divorce.

1)    You need to be aware of all the accounts that you are
responsible for including:  bank
accounts, mortgages, credit cards, utility and medical bills.

2)    Dissolve all joint accounts as soon as you can.  Cancel your accounts together legally.  Start with your joint checking and savings
accounts.  If you have both signed on the
car loan you may have to refinance the loan to remove your spouse’s name.  Any bills that you pay together, such as
utilities, put in just one name.  As for
credit cards, try to work with the credit card company to transfer 50% of the
debt on to two separate cards.

3)    Sell the house immediately unless one spouse is able
to refinance the mortgage in their name alone.
If you do not sell, and one spouse takes over the mortgage, later
defaulting, the foreclosure will show up on both credit files.  This will affect the ability of both spouses
to obtain a mortgage in their own name.
If you sell right away, you can split the profits and walk away without
any further liability.

4)    Document everything that you do.  If questions arise later, you will have the
proof that you need to help rectify the problem.

5)    Review your credit file and credit scores.  Make sure that all of the information that is
being reported about you is correct.
Take action to clear up any delinquent accounts as quickly as
provides a free credit report from each of the three credit reporting agencies.

6)    Notify your doctor’s office that you are no longer
liable for your spouse’s medical debts.

Divorce is a stressful
time.  If you would like help in creating
a budget or making sense of your credit report give us a call.  Many times, we were not taught how to handle
our money at school or at home.  It is
never too late to start to organize your finances.  Education is a big part of what we do at GAP
Financial Services.  You can reach us at


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