Many spouses in Pennsylvania are wary of the financial impact of divorce. Separation could be particularly difficult for couples who have been married a long time or have a significant amount of investments. However, these issues can go far beyond the immediate division of assets at the end of a marriage. Divorce can have an effect on each spouse’s credit score, especially if they do not take action to protect themselves when negotiating the dissolution of the relationship.
Of course, divorce itself does not necessarily impact creditworthiness; marital status is not taken into account in a credit score. However, a separation could lead to credit issues in indirect ways. While a divorce decree can bind both former spouses, it does not bind lenders. Some couples may agree that one party will be responsible for certain joint accounts but fail to change these accounts into individual accounts or transfer the balances to other, independent accounts. If an account remains joint, both spouses can be held liable by the creditor for the balance, regardless of agreements between them in the divorce decree. That means that both former spouses can also suffer a credit hit in case the responsible party stops paying or pays late.
In addition, joint accounts also remain on both parties’ credit reports for as long as they remain open and in a joint status. In many cases, it can be important for both parties and their lawyers to negotiate how all of these accounts will be handled and separate the accounts as part of the divorce process.
Changes to a credit score can have long-lasting effects. However, a lawyer can advise a divorcing spouse on a range of legal matters. If necessary, legal counsel could work to negotiate property division in a way that protects credit scores.