Credit Card Tips When Getting Divorced
Divorce is more than ending a marriage. It also requires splitting up your finances, including credit card debt. No matter how emotional the divorce may be, dealing with the debt requires a solid plan and cool heads. It may also require a lawyer.
CDC statistics show that about 44.6% of marriages end in divorce. If you are in that situation, you are busy with papers, meetings with attorneys, and court hearings. It is easy to lose sight of matters that go beyond these meetings as well as the emotional toll. Your finances are important, and they can be an area where you become blinded by everything else. Start by figuring out what to do about credit cards.
Credit Card Tips When Going Through a Divorce:
#1 – Print Out and Look Over Credit Reports
Start with an investigation of all accounts for both spouses. Get a copy of a credit report from all three agencies and print them out. Make a list of every open credit account and whether it is a joint or individual account. You need to note who is responsible for the debt on any credit cards.
At the same time, see if any hard credit pulls are in the reports. If there is a hard credit pull, there is a chance your spouse applied for new credit cards. You need to make sure your name is not on those cards. If you are opening a new card, make sure your spouse’s income and information have not been used on the application. If new accounts are opening and neither of you owns them, you need to file a fraud report and have your credit reports corrected.
#2 – Close Joint Accounts
Joint accounts are held by you and your spouse together, and both of you are equally responsible for the debt, regardless of how the debt is distributed in the divorce. Close all joint accounts. If an account is left open, your ex-spouse can add more debt, make a late payment, or miss a payment or default. If that happens, you will also be held responsible. The creditor reports account activity to the credit bureau in both of your names. This affects the personal credit score for both individuals. It will not only be costly for you, but it can trigger a rate increase for all of your other credit accounts.
When you close the account, notify the credit card company about your divorce by mailing a certified letter. Certification gives you the proof that your letter was mailed and received by the credit card company. Ask them to provide a current account statement and tell them that you do not intend to be held liable for any debt accumulated after the date of the written letter. Request that they put the account on inactive status so no new additional charges may be added, and stipulate that once the balance is paid in full, the account is to be closed completely.
Follow up with a phone call to your credit card issuer to make sure they have gotten the letter and have added the stipulations to that account. You can make the initial request via online chat, too. If you do, keep copies of the conversation and representative’s name. Avoid using the phone as your primary form for requests as it does not give you as much of a paper trail. If there are any problems in the future, a paper trail can help you prove that you took the right steps.
#3 – Remove Your Ex-Spouse From Your Accounts
Remove your spouse’s name from your individual accounts as soon as possible. Also, remove your name from your spouse’s individual accounts. This will limit your responsibility for new debts added by your spouse and vice versa. If your spouse is an authorized user for any of your accounts, revoke the authorization. Send the request by certified mail.
#4 – Pay Off Credit Card Debt Before the Divorce is Final
If at all possible, pay off all credit card debt before the divorce is final, even if you have to liquidate marital assets. Sell the home and items you do not need like a third car and use the equity to pay off debt. If you do not have enough cash or proceeds from selling items, think about dividing up the debt, transferring your share with a balance transfer card, and then canceling the joint accounts. If paying off all the debt is impossible, then create a payment plan and make sure that you continue making payments on time so you won’t hurt your credit score and incur the late fees or over-the-limit fees.
Monitor your account each month to make sure your ex-spouse is also making the correct payment each month. Pay off your balance as quickly as possible and watch your credit report to make sure the final payment gets reported correctly and that the account is marked closed.
#5 – Hire a Financial Expert or Mediator to Help Reach a Fair Resolution
If the two of you can not reach an agreement on settling shared debt on your own, hire a mediator or financial planner to help you come to a resolution. Do not agree to take on your spouse’s debt or allow your spouse to take on your debt as a kind gesture without first talking about the implications to a financial planner or mediator. If finances change and you or your spouse cannot keep making payments, it can damage your credit.
#6 – Check Your Credit Report for Free Each Year
After the divorce is finalized, monitor your credit report to see if any errors or problems pop up from the joint credit you had during your marriage. You should also watch for loans taken out by your ex-spouse using your name. It may be something you never expect your ex to do, but it has happened. You can not change your Social Security number, but you can take steps to protect yourself. If you find your ex is trying to run up debt using your information, file a fraud report.
Request a free copy of each report once a year from AnnualCreditReport.com. Sign up for a credit monitoring service if you are concerned about identity fraud or the possibility of new joint accounts opened after the divorce. You can also put a credit freeze in place that requires you to thaw your information before you can apply for a new credit card or loan.
#7 – Fill Out a Change of Address
If you are the one who moves out, notify your credit card companies of your change of address. Submit a change of address card with the U.S. Postal Service. The forms to do that are available inside the post office lobby. You can also fill out an online change of address if that’s easier. Be aware that with the online form, the USPS does charge a small fee to verify your identity before the address change is finalized.
You should also go online and change your address with your banks and credit card companies. This is an added precaution to make sure your credit card company has your information as quickly as possible. The bills go to your new address to ensure you’re not missing anything or relying on your ex to forward your mail.
#8 – Apply for a New Credit Card
If you do not have a credit card in your name only, apply for one now. It may be easier to get a credit card in your name now than after the divorce. Why is that? Once the divorce is final, it may impact your credit score depending on the level of debt you hold.
Before you do this, compare cards online by reading reviews and checking out the different APRs and annual fees. The lower your credit score, the higher the fees and APR may be, but that does not mean the best credit card is out of reach. You can narrow your search by asking about prequalification. You will have an idea of how eligible you are before you formally apply and let the credit card issuer do a hard pull of your credit report.