How Divorce Can Affect Your Credit
There’s a 50/50 chance you’ve either experienced one, are in the midst of one, or will go through it in the future. Divorce is sadly a common occurrence in today’s culture. It’s the separation of two partners who decide to live their lives apart instead of together, but it reaches much further than just the home. It isn’t often considered how divorce can affect your credit.
It’s true – it’s all too easy for your credit to suffer when you’re in the throes of a divorce. Here are just a handful of ways it can occur.
Because divorce usually involves hurt feelings and a lack of communication, payments are easily missed. John doesn’t want to pay Jane’s cell phone bill and it goes to collections. Jane racks up charges on John’s credit cards and John can’t pay the minimum balance or, worse yet, doesn’t know about it. And even if it’s an amicable separation, bills can just fall to the wayside.
Your divorce settlement awards you the house. But until now, you’ve relied on dual incomes to pay the mortgage, the home insurance, and the maintenance costs. Now that you’re on your own, your income can’t support your current home.
It takes time to sell a home and buy something more affordable. If you’re renting, you could be locked in a lease. Before you know it, you have to choose which to pay and which ones to default on.
Credit Card Debt
Typically, one partner is the spender and the other is the saver. A spender has a hard time controlling their habits on their own, which could lead to spending beyond their ability to repay. Credit cards get maxed out – at that point, it’s virtually impossible to pay them off with the minimum payment.
Your divorce settlement includes alimony for a set period of time, and it can affect both parties when it comes to credit. The one who must pay alimony is giving a big chunk of their income to their former spouse, leaving scraps to live on. The one receiving the alimony might depend on the payments coming on time, and late or missed alimony payments may leave them unable to pay bills.
Garnishments and Judgments
Sometimes, one partner might not agree with the settlement. Usually it’s the one who’s been ordered to may support payments. Refusing to make those payments can seem like a good idea at the time, but it can severely damage credit scores. Eventually, the missed payments are sent to a collection agency. If it still isn’t paid, it goes before a judge who can order wages garnished.
All of these divorce issues can affect your credit in a bad way. From garnishment orders to missed payments, it stays on your credit bureau for years to come. It affects your ability to get approved for credit and will impact your life for some time.
If a divorce has affected your credit, it can be difficult to get a car loan. At CarUp KC, our financing professionals understand your situation, and we can help. Our lenders will work with you to get you approved for a car loan, even if your credit is less than perfect.