Credit Report     Repairing      after Divorce or Separation

If you've recently been through a divorce, or are contemplating one, you may want to look closely at issues involving your credit.  Understanding the different kinds of credit accounts opened during a marriage may help you see the potential benefits and pitfalls of each.   There are three types of credit accounts: Individual, Joint, and User (co-signed).  You can permit authorized persons to use the account with either.  When you apply for credit, whether it be a charge card or a mortgage loan, you'll be asked to select only one type, an Individual or Joint Account.

Individual Account: Your income, assets, and credit history are considered by the creditor.  Whether you are married or single, you alone are responsible for paying off your debt. The account will appear on your credit report, and may also appear on the credit report of any "authorized" user.  However, if you live in one of the community property states like Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin, you and your spouse may be responsible for debts incurred during the marriage, and the individual debts of one spouse may appear on the credit report of the other.

Advantages/Disadvantages: If you're not employed outside the home, work part-time, or have a low-paying job, it may be difficult to demonstrate a strong financial picture without your spouse's income.  But if you open an account in your name and are responsible, no one from your past, can negatively affect your credit record in the future.

Joint Account: Your income, financial assets, and credit history, and your spouse's, are considerations for a joint account.  No matter who handles the household bills, you and your spouse are responsible for seeing that all debts are paid.  A creditor who reports the credit history of a joint account to credit bureaus must report it in both names (if the account was opened after June 1, 1977).

Advantages/Disadvantages: An application combining the financial resources of two people may present a stronger case to a creditor who is granting a loan or credit card.  But because two people applied together for the credit, each is responsible for the debt. This is true even if a divorce decree assigns separate debt obligations to each spouse.  Former spouses who run up bills and don't pay them can hurt their ex-partner's credit histories on jointly-held accounts.

Account "Users" If you open an individual account, you may authorize another person to use it. If you name your spouse as the authorized user, a creditor who reports the credit history to a credit bureau must report it in your spouse's name as well as in your's (if the account was opened after June 1, 1977).  A creditor also may report the credit history in the name of any other authorized user.

Advantages/Disadvantages: User accounts often are opened for convenience. They benefit people who might not qualify for credit on their own, such as students or homemakers.  While these people may use the account, you not they, are contractually liable for paying the debt.

If You Divorce or Seperate