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Three Joint Credit Risks to Eliminate Before the Divorce

September 23rd, 2010 · No Comments · Auto Loans, Credit Cards, Mortgages

by Kristy Welsh

(Last Updated On: March 29, 2017)

In the emotionally-charged process of ending a marriage, making rational financial decisions together can be tough. But there are some things that you simply must discuss and decide before the divorce is processed, and one of them is the elimination of joint accounts before the deed is done. After all, the last thing you want to do after divorce is fight about who is going to pay what. And if just one of you comes up short, it will affect the credit rating of you both.

1) Your house. If your home mortgage is in both your names, sell the house so that you are both relieved of the financial responsibility. It can serve an important emotional purpose as well, as your home represents your lives together and it’s time to move on to something new. Of course, if there are children involved it may be more emotionally beneficial to them to keep the house, in which case simply refinance the mortgage in the name of the parent who will be living there with them.

2) Your cars. If you own vehicles in both your names, you may consider selling them before the divorce, however, refinancing in your individual names is probably a more attractive option. Though you certainly associate your vehicle with your family, it’s probably on a much smaller scale than the same feelings you have about your home.

3) Your credit cards. If you have credit cards in both your names, pay off the balances and close the accounts. Ideally each of you have the cash on hand to pay the balances off in full. If not, the next best option is to take out credit cards in your individual names and each of you have a portion of the old balances transferred to the new cards. If for some reason one of you does not have the credit to qualify for your own card, ask a family member to co-sign. Take whatever means necessary to eliminate joint credit cards, as joint accounts can be included in individual bankruptcies down the road.

Read more about divorce and your credit.

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