If you are considering divorce, are currently divorcing, or have recently been through divorce, you may want to look closely at your credit.

Regardless of your divorce decree, you may legally be held responsible for your ex-spouses debt and have any late payments, collections, and other derogatory credit on your credit report.

For example, your divorce decree states the your ex-spouse is responsible for your joint credit card accounts.  Months later, you apply for and are denied credit due to the late payments on these accounts.  You contact the creditors to argue that your divorce decree clearly states that you are not responsible for these accounts.  Your creditors correctly state that they were not a party to your divorce decree and that you are still legal responsible for the debts.  You wonder how this is possible.

First, you need to understand that getting divorce does not excuse you of the debts you owe your creditors, or debts you accumulated before, during, or after your marriage.

Second, an understanding of the types of accounts will give you the knowledge of why you are responsible and how to protect yourself.

Individual and Joint Accounts

When you or your ex-spouse applied for credit, be it a charge card, auto loan, or mortgage loan, you select a type of account.

Individual Account: The creditor in granting you the loan, considered your income, assets, and credit history.  If you were married, or single at the time, you alone are responsible for paying off the debt as it is your account.  The account payment history will appear on your credit report.  It may also appear on the credit report of any authorized user you may have added.  However, if you live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin), you and your ex-spouse may be legally responsible for the debts incurred during your marriage, and the individual debts of one spouse may appear on the credit report of the other.

Joint Account: The creditor in grating you and your spouse the loan, considered both your and your ex-spouses income, assets, and credit history for the joint account.  You and your ex-spouse are fully responsible for the entire debt no matter when it was incurred.  Regardless of whom the divorce decree assigns the debt, each of you are responsible for the whole debt.  If your ex-spouse continues to charge on the open joint account, you will still be responsible for these charges.  A creditor who reports the credit history, must report the history of a joint account to credit bureaus in both names if the account was open after June 1, 1977.

Account Users: If you opened an individual account, you may have authorized another person to use it.  If you authorized your spouse, a creditor who reports the credit history to a credit bureau must report it in your spouse’s name as well as in yours if the account was open after July 1, 1977.  A creditor may also report the credit history in the name of any other authorized user.  Therefore, your credit may be affected if you are an authorized user on someone else’s account who is getting divorced or not paying on time.  You are also responsible for the entire debt on the account even if the debts were incurred by an authorized user on your account.

If you are Divorced or are Divorcing

If you are considering divorce or separation, or are going through a divorce, pay attention to the status of you credit accounts.

If you have joint accounts with your spouse/ex-spouse, it is important to make payments on time so your credit doesn’t suffer.  As long as the account has an outstanding balance, you and your spouse are responsible and any late payments will show up on both credit reports.

You may want to close joint accounts or accounts in which your former spouse was an authorized user.  By law, a creditor cannot close a joint account because of a change in martial status.  A creditor can however, close the account at the request of either spouse.  A creditor does not have to change a joint account to individual account.  Although they may do so, a creditor may require you to reapply for credit as an individual, based on your individual status, approve or deny you credit.

With a mortgage or equity line, you will need to refinance to remove a spouse from the note and the title.

Closing accounts and opening new accounts will reduce your credit score in the short-term.  This is preferable to late payments and collection accounts in the long-term, which become your credit history for the next seven years.