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Your credit reports and scores are probably the last thing on your mind when you’re going through a divorce. There are a lot of details and decisions requiring for your attention.

You have to divide assets and debts, hunt for a place to live, adjust to a budget on one income. If you have kids, you have to figure out custody and child-care arrangements.

It’s also crucial to remember that protecting your credit during a divorce is important too.

4 Steps to Protect Your Credit During a Divorce

Although it can be tough to come through a divorce with credit that’s still in good shape, it is possible, especially if you and your ex-spouse can agree to work together.

Here are four steps you can take to protect your credit during a divorce:

1) Check Your 3 Credit Reports

It’s always important to keep an eye on your credit reports from Equifax, TransUnion and Experian. However, it’s especially important when you’re going through a separation or divorce.

You can check your credit reports for free once every 12 months at AnnualCreditReport.com. After you’ve claimed your freebies, there are a number of websites where you can check your reports for free or sign up for a credit monitoring service to keep track of the three credit-check agencies for a fee.

Further Reading: 18 Ways to Check Your Credit Score for Absolutely Free 

If you want to be extra cautious, it’s a good idea to check your three reports:

  • Before you separate (or as soon as possible afterward)
  • Once a month after separation

Be sure to save copies of your reports. If your ex-spouse opens or attempts to open credit in your name after separation, your credit reports can serve as proof of what happened. By checking your three reports frequently, you’ll be able to react quickly if any problems arise.

Tip: If you’re worried that your former spouse might try to open credit in your name during or after a divorce, a free credit freeze can help protect you.

2) Separate Joint Accounts

Separating joint accounts and dividing debt is probably one of the most difficult parts of a divorce — at least from a financial perspective. If you co-signed a loan or credit card with your spouse, you’re both responsible for the debt in the eyes of the lender. That’s true whether the account is a mortgage, an auto loan, a credit card or other financial obligations.

The best way to protect your credit during a divorce is to pay off and close joint accounts as quickly as possible. Here are a few ways to accomplish that goal:

  • Sell the asset (e.g., the home or car) and use it to pay off the loan. If there’s money left over, use it to pay off other joint debts.
  • Refinance the loan into one person’s name. Will your ex-spouse be keeping the house or vehicle? If so, it’s best to refinance the loan in his or her name. If there’s equity available in the home, you may be able to get your ex-spouse to agree to a cash-out refinance and use the available funds to pay off other joint debts, like auto loans or credit cards.
  • Close joint credit cards. If you and your former spouse co-signed to open a joint credit card, it’s typically best to close the account during a divorce. This goes against standard credit advice and, in truth, closing a joint card might have a negative impact on your credit score if it causes your credit utilization to increase. However, if you don’t close the account, you risk legal liability for late payments and future charges made by your former spouse.
  • Remove authorized-user status. Even if your former spouse isn’t a joint account holder on any of your credit cards, he or she may have authorized-user status on your account. If that’s the case, call your card issuer and remove the authorized-user status. Otherwise, as the primary cardholder you will be responsible for any future charges if your ex-spouse uses the account.

3) Understand How Your Divorce Decree Works

As part of your divorce settlement, the judge will issue a divorce decree. Among other things, your divorce decree states which party (you or your ex-spouse) is responsible for paying the debts. So, if the court says your former spouse is responsible for paying a joint mortgage, that would be stated in the divorce decree.

But there’s a catch — and it comes as a shock to many people. The truth is that your creditors generally don’t care what your divorce decree says.

If you signed a joint contract with your former spouse for a loan or credit card, you’re still responsible for the debt in the eyes of the lender, regardless of what your divorce decree says. If your ex-spouse is assigned responsibility for paying a joint mortgage in your divorce decree, but he/she fails to pay on time, new late payments will almost certainly be added to both of your credit reports. Both of your credit scores could suffer.

The scenario above happens all the time. It’s one of the reasons why it’s so important to pay off or refinance joint debt prior to the final divorce decree, if at all possible, as recommended by Experian.

4) Establish Your Own Credit, If Needed

Finally, make sure you have credit established in your own name. This is especially important if all of your previous accounts were joint or if you were only an authorized user on the credit cards.

Need to build credit in your name? A credit card can be a smart place to start. A properly managed credit card (no late payments, balance paid in full each month) has the potential to do great things for your credit scores.

The Bottom Line

Not doing the work to protect your credit during a divorce might leave you feeling less overwhelmed in the short term, but it’s a mistake that can haunt you for years to come.

Post-divorce, many people find themselves with low credit scores and damaged credit reports, unable to qualify for loans, credit cards or even an apartment.  You can and should do everything in your power to avoid these problems.

Make the effort to protect your credit on the front end. It might not be fun, but you’ll be grateful later.

Featured photo by fizkes / Getty Images.

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