Changing the status of your relationship (whether moving in together, entering into a marriage or civil partnership) does not necessarily affect your credit score. However, it is likely that during the course of your relationship, you will take out joint credit such as a mortgage, credit card, loan, overdraft or utility bill. When joint credit is taken out, your credit ratings will affect each other.
Credit after divorce
When you and your partner apply for credit together, the lender will look at both of your credit scores. This is because you will both be responsible for the debt, overdraft facility and repayments. If one party fails to contribute or meet the repayments, the other is legally obligated to make the payments.
It is important to be aware that until joint debts are settled, and accounts closed, or transferred into one parties’ name, your association with your ex-spouse will remain. This means that in the future, your ex-spouses credit score will also be taken into consideration on any applications you make (even if the application is in your sole name).
It is therefore essential, upon separation to consider who is going to responsible for outstanding liabilities or how they can be repaid. Until all joint liabilities are settled and the accounts are closed, you will continue to be financially linked. There are various options you should consider, when separating your credit on divorce such as: –
- If possible, factor repayments of joint liabilities into your financial settlement so the debts are cleared. If money is tight, prioritise those that you can repay.
- For debts which cannot be cleared as part of your financial settlement, consider who is going to take responsibility for the credit, then request for the credit to be transferred into that parties’ sole name. You will need to contact each creditor and explore the options available with that lender.
- Often the biggest debt to divide is the mortgage on the family home. If one person is retaining the property, you may need to consider refinancing to remove the other parties’ name. If this is not possible, the property may need to be sold, and the proceeds divided.
- Divide and close all joint bank accounts and utilities.
- Ask a Credit Reference Agencies to remove your ex-spouse from your credit report. This is known as a notice of disassociation where you will need to demonstrate that your financial connect has ended.
Child Maintenance and Credit Scores
Another way that your credit score can be impacted on separation is if you (as the parent who is obligated to pay child maintenance) fails to make payments. If the Child Maintenance Service are involved and are unable to recover the payments owed from you, they can apply for a liability order in the magistrate’s court to recover any missed payments. A liability order will appear on your credit score in the same way that a loan, debt or mortgage appears and could affect your ability to take out credit in the future.
It is essential that you seek expert financial advice alongside legal advice if you find yourself in difficulty with debt or your credit score.
How we can help you
Going through a divorce can be difficult, our specialist Family Law team are here to help you go through the process. You can speak in confidence to a family solicitor, to help you understand your legal options before you take the decision to separate, or afterwards, and consider your next steps