Your credit history doesn't divorce when you do

Are you thrilled to be rid of your lying, cheating, good-for-nothing spouse? Well don't throw a party just yet. You may be divorced from the world's worst husband or wife, but that doesn't mean your togetherness is over.

Did you know that after you divorce, you still may be tied to your ex for many years by way of your credit report? That's right.... Your credit history doesn't divorce your spouse, even when you do.

The problems start when the spouses agree that one will continue to pay a debt for which both are legally bound. Sometimes the husband takes the truck and agrees to make the payments, but the debt is in the names of both the husband and the wife. He decides to stop paying but is still driving around in the truck. What happens?
The ex-wife better be willing to start paying for that truck, because the creditor will soon be knocking at her door. The same goes for a mortgage, credit card, or other loan. The creditor doesn't care what was agreed to in your divorce agreement. If your name is on the debt, you are legally responsible for it, period.

And then there are the problems when your ex-spouse defaults on debts you had no part of, but those defaults end up on your credit report. You have legal grounds to have that derogatory information removed from your credit report because it's not your responsibility. But while you work it out (which can sometimes take months) you may be not be able to buy a house, refinance your mortgage, get a new car, or get a credit card.

It's important to keep a close eye on your credit report once you divorce. Make sure that only your own credit information is being recorded, and have anything related to your ex-spouse removed immediately.

And if possible, do not make agreements between yourselves about who will pay debts that are legally in both of your names. Take steps to have your name removed from loans and credit cards before your divorce is final so that you don't end up being responsible for something that's not your fault.

This isn't easy -- often times creditors don't want to remove one party from the debt because that could reduce their chances of getting paid in the long run. But it's worth a try to separate the debts to protect yourself from future problems.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
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