Divorce and Credit Reports

If husband and wife divorce, how does that affect your credit report? The answer depends on how the credit accounts were held during your marriage.

• An individual account is for one person or the other, but not both. An individual account might be from a debt that existed for one spouse prior to the marriage, or from a debt opened in just one of the spouses names during the marriage. As far as credit reports and your creditors are concerned, these accounts remain the same after the divorce. They only on one spouse's credit report.
• A joint account is more common in marriage. Unless changed, both spouses are responsible for payment on the account, and it appears on both credit reports, even after the divorce.

What to do with Joint Accounts

Normally, joint accounts should be closed, but you cannot expect it to happen automatically. The creditor needs the  permission of one spouse or the other, and it might be handled in one of these ways:

• Remove one spouse from responsibility for the debt
• Convert the joint account to individual accounts. (It may be necessary for each spouse to qualify for credit.)
• Mortgage and home equity loans may need to be  refinanced to remove a spouse from the obligation.

Other Account Classifications

During marriage, the wife or husband might be listed as an authorized user on a credit card account. This indicates a shared account, but the person is responsible for payment.

Maker and Co-Maker are classifications that appear for borrower and cosigner, if someone has cosigned for a loan. Both parties are responsible, just like a joint account.

After you've been removed from an account, it will still be on your credit report, usually with a terminated classification. Though you may no longer be responsible for payment, the account will continue to affect your credit, favorably or unfavorably, depending on the payment record before you were released from the obligation.

Establishing Credit after Divorce

The ECOA (Equal Credit Opportunity Act) mandates that lenders must consider the credit history of accounts women have held jointly with their husbands.

The ECOA also requires that companies make their reports to credit bureaus in the names of both husband and wife if both use an account, or both are responsible for repaying the debt. If a favorable closed account was incorrectly shown in just one spouse's name, you should ask the creditor to correct it.  Or, contact the credit bureau to have it investigated and corrected.

In some cases, you may be able to establish new credit by getting the lender to look beyond the credit report. For example, you might show evidence that accounts were paid from a joint checking account (if the history is favorable), or that the ex-spouse was the cause of all the credit problems (if the credit record is unfavorable.) 

In any case, open your own accounts to begin start building own credit history after the divorce.