Getting divorced is one of the most painful and traumatic experiences one can go through in their life. It’s even worse when it takes place after a couple has spent years with each other. However, it’s still more common than we would want it to be.
To get divorced is painful as it is. However, it also comes along with additional troubles like legal fees, child support, splitting of assets, etc.
Many people wonder whether getting a divorce affects the credit score. The answer, is unfortunately "yes". Depending on the kind of relationship and financial arrangement you had with your spouse, a divorce can greatly affect your credit. For all you know, you could end up struggling for a loan with a bad CIBIL score.
The following are some of the common ways a divorce can lead to credit damage:
To get a high-value home loan you have to increase CIBIL score to a certain extent, which can often be hard. This is why married couples often apply for a joint loan which increases their chances of loan approval. However, this also means that they share equal liability for the loan repayment.
If you took a joint home loan with your ex, and after the divorce they stop making the payments or default, then it can lead to all kinds of problems. First of all, your CIBIL score will take a big hit. If you won't pay the loan EMIs, then your bank can also seize the property itself.
A divorce settlement can be a costly affair. If you end up losing a good portion of your savings, it's possible that even making the ends meet becomes difficult. In such kind of situation people often start maxing out their credit cards. Sometimes they also apply for a new card. This could easily end badly.
If you increase the credit utilization and start making minimum payments only, your debt could increase significantly which can hurt your credit. The situation could become so bad that you may not even get a loan with bad CIBIL score.
If your ex has an ill-will and access to your credit card accounts, it's possible for them to engage in some "carefree" online shopping. You may not even learn about these transactions for weeks if the mobile number that's linked to the cards is your ex's. However, if they continue using the credit cards by making minimum payments, or worse- no payments at all, then your CIBIL score can take a beating.
After months of emotional turmoil and depletion of savings from a divorce settlement, the last thing you would want is to have to increase CIBIL score once again. So, it's important that you act smartly and minimize the risk to your creditworthiness. In that endeavour, the following are some of the things that you can do:
If you have a joint loan, credit card accounts or savings accounts in a bank with your ex, the first thing you should do is to detach yourself from these. While a savings account won't be a problem, and a credit card account can easily be separated after paying the balance, a joint loan could be tricky. If a property is involved, you may have to create some kind of settlement with your ex. However, at any rate, resolution of these issues is extremely important.
If your ex is an authorized user of your credit card(s), then you may want to evoke this privilege after the divorce. After all, you don’t want them to continue using your credit card(s) without your permission.
A divorce can take a toll on not just your mental health but your finances as well. However, you cannot afford to get your credit in shambles. So, even though it’s hard, you need to keep your finances in control and prevent your debt to go high at all costs. Otherwise, you have to fight another battle after your divorce is settled.