Nothing is as devastating as a break up. It can derail your plans for the future and completely disrupt your life. Amid the agony and heartache, it can be tough to think about finances but they can't be ignored. Financial disputes will prolong your troubles as they can ruin your credit. Take the example of Rahul & Misha.
They were an endearing pair. Clearly theirs was a match made in heaven, up until they decided to part ways owing to "irreconcilable differences". It is not uncommon for people to not find common ground to work upon and they mutually agree to part ways.
In a society like ours it is not easy to get a divorce. A lot of money and time goes in the process of splitting up and often the most lingering effects of a divorce – that is damage done to one's credit in the process – is ignored. It is not noticed until it raises its ugly head to haunt your future credit aspirations.
Unfortunately, Rahul & Misha's divorce is a perfect example. It was rushed and processed quite thoughtlessly. The family home was purchased with a loan, co-borrowed by both. As part of the divorce settlement the house now belonged to her ex-husband and so Misha assumed the loan was no more her responsibility and decided to completely ignore it. She was certain that the court was the supreme boss and its ruling would supersede all contracts.
Right after moving out of their family home Misha, out of spite, went on a shopping spree using her add-on card which Rahul had gifted her. She had no intention of paying the bills as she wanted to spoil Rahul's credit standing.
But what she did not figure is the damage she was doing to her own CIBIL score. Some months down the line, Misha decided to let the bygones be bygones and move on. She drafted a plan to flag off her own boutique and so she applied for a personal loan to buy essential appliances and materials. Alas, she was denied the personal loan for low CIBIL score. She was shocked and perturbed because she didn't know how it was possible.
Misha had always been proud of having stellar credit scores. When she contacted her bank and the credit bureaus she learnt how her own actions had led to her downfall. Rahul had not paid off the credit card bills either as he had not made those purchases. Misha had no intention of paying them in the first place.
Rahul had not been paying the HDFC home loan EMIs over the period of divorce. Though he was quite disturbed by it but often missed his payments as he was sure that was his sweet revenge. Since in the eyes of the lender Misha held an equal responsibility towards the loan, her report too showed the missed payments. The saddest part, they both suffered a loss, especially in terms of credit points.
Firstly, divorce decrees do not nullify any contracts with lenders. On the basis of the decree the terms of the agreement can be altered but until then the responsibility lies jointly upon both the borrowers. Misha should have approached the lender submitting a copy of the decree and made sure she had legally exited the home loan contract. Brushing off the responsibility or simply assuming it does not exist is not the proper way of handling it.
If you have any debts jointly borrowed, then have it restructured to one party's name. Let the lender free the other party of their responsibility and make sure they stop sending details of the loan to the credit bureaus. Otherwise both the parties will be treated as loan defaulters irrespective of what the court has mandated and would be forced to look for bad credit fix.
If there are credit cards that you hold together, make sure you have them cancelled before you part ways. Outstanding card bill is the responsibility of the primary card holder as well as the add-on card holder and piling unpaid bills will affect both the party’s credit scores. Giving your problems a cold shoulder doesn’t make them go away.
Most importantly, earlier you had the support of your partner's income. But now since you are going to be on your own, so you will probably need help of credit. You don't want to mess it all up even before you start applying for loans and credit cards in your own name.
Sometimes you come at a fork in life's journey and you may have to part ways with your partner. Settling it amicably and meticulously will help both the parties. Doing so would mean you don't have to indulge in damage control later. And both of you can move on comfortably, without having to deal with additional issues in future.