Getting divorced or dissolving a civil partnership can be an emotionally taxing time. And when money is wrapped up in the process it can be even more challenging to untangle and reorganise. On top of all that, you might be wondering: does a divorce affect your credit score? Loqbox’s guide has tips and advice on building and repairing credit standing after divorce or legal separation.
The way that you manage your borrowing, like credit cards and loans, is reported to the top three credit reference agencies (CRAs) in the UK: Experian, Equifax, and TransUnion. They use that information to generate your credit reports and credit scores. Your scores are a number that summarises your credit report, and you can think of them as a tool to help you see how creditworthy you appear to lenders.
If you’ve recently had a divorce, credit scores probably won’t be high on your priority list. But if you’re wondering what your credit scores after divorce are, check in on all three, for free and as often as you’d like to without hurting them, using these services:
ClearScore (uses Equifax data)*
Credit Club (uses Experian data)
Intuit Credit Karma (uses TransUnion data)
*For transparency, we wanted to let you know that ClearScore pay us a small commission if you sign up using this link.
Generally, the higher your credit score the more likely you are to be accepted for new lines of credit like mortgages or even mobile phone contracts, and the lower the interest rates you’ll often be offered. This can save you thousands in the future. So it’s natural that you’d be worried about bad credit after divorce.
Does getting divorced affect your credit scores?
No. The good news is divorce or separation does not directly impact your credit score. Divorce doesn’t show up on your credit report — it won’t say if you’re married, in a civil partnership, single, or divorced. But if you had joint financial obligations with your ex-spouse, like accounts or mortgages, there could be indirect influences on your creditworthiness.
When, and why does divorce hurt your credit?
During a marriage, couples often will have opened joint accounts, including utility bills where they are both named, or debts such as mortgages, car loans, and credit cards.
Any missed payments, late fees, or even defaults on these joint accounts or debts, can come back on both people. In that way, divorce can affect your credit score. Here are things you should consider.
If your ex-partner is listed on your credit report as a ‘financial association’ through joint accounts and debts, it’s possible that their activity with credit will affect your own credit score. Many people are unaware that their financial associations will continue after a divorce. That can be a nasty surprise, even years down the line!
Divorce is a big change in your life. One way that it can impact you is by reducing your overall income by separating the earners. While the money coming in might drop, the outgoings won’t necessarily change. If you struggle to keep up with your credit commitments, then you could see divorce hurt your credit score.
Thin credit file after divorce
If your spouse was the primary bill payer and you divorce after six or more years of marriage, you might find your credit score suffers due to inactivity on your report (six years is how long it takes for information to be removed from your credit report). So if you haven’t paid bills or used much credit in that time, you might have a ‘thin’ credit file.
If this is playing on your mind, check out Loqbox as options to start rebuilding your credit history for just £2.50 a week. Our members have seen an increase of 300 points to their credit score in just three months of using Loqbox Grow, Loqbox Save and Loqbox Rent all together.
Improvements to your credit score are not guaranteed.
Many things can affect your credit score. We’ve put together these golden rules of credit building if you’d like to find out how to improve yours.
How to protect your credit score during divorce
Separate joint accounts and debts
If you’re going through a marital divorce or dissolution of a civil partnership, it’s important to divide or close any joint obligations. You may want to change to individual accounts where necessary. You will likely have to share out the assets first. This can be tricky, so you may want to use a solicitor or a divorce mediator to settle things fairly, or without having to go to court.
Once you’ve separated your assets and you have individual accounts, make sure you contact Experian, Equifax and TransUnion to request that your ex-partner be removed as a link to your credit report. Until this financial association has been removed entirely, your credit score after divorce could potentially be impacted by your ex-partner’s actions.
It’s worth mentioning that you can separate this information whether you’re getting divorced after marriage, or parting ways as a cohabiting couple. Your credit report doesn’t check your marital status, just your current financial associations and how they affect your creditworthiness.
Sort out your mortgage
Working out what to do with your house after a divorce can be really hard. After all, it’s been your home. But It’s also likely to be one of your biggest assets, so it’s important that you separate the financial obligations to the mortgage. There are a couple of ways you can tackle this:
If both sides feel that ownership is equal, you can sell the property and split the assets with your ex-partner. Otherwise, if you can afford it and you really want to keep living at the property, one or the other of you could take the mortgage on yourself. A solicitor can transfer the ownership to one person and they will then take responsibility for repayments.
Monitor your credit report
It’s important that you regularly monitor your credit report to spot any potential errors, unauthorised accounts, or missed payments. While you can report the changes to the credit reference agencies, it is still possible that things will get missed. Getting errors fixed quickly can help protect your credit score. Find out how to fix errors on your credit report here.
Whether you’ve been stung by bad activity on your credit report by a financial association, you’ve missed payments due to a drop in income, or you have a thin credit file because of your divorce — it doesn’t have to be the end. You can still rebuild your credit score.
Building and repairing credit after divorce
If you have bad credit after a divorce, dissolution or separation, don’t panic! While it can take some time and patience, your credit score can still improve a lot. If you want to learn more about how to improve your credit score, check out our blog. But here are some things you can do right now to start building and repairing your credit score after divorce or separation.
Make timely payments
The first thing to do is make sure that you are paying all of your bills, including credit card bills and loans, in full and on time. Timely payments contribute significantly to improving your credit score. It can take time and patience so the sooner you start to get that right the better. Missing just one payment can dent your credit score significantly and stay on your credit file for six years.
Create a budget
If you’re struggling with making your payments in full and on time it may be a good idea to create a budget. You can find out about different budgeting rules here. But we’d suggest you use the 50-20-30 budget rule to start to get a realistic and effective grasp on your finances.
The 50-20-30 rule separates your income into chunks. 50% goes towards what you need to spend money on (rent, bills, etc.), 20% is your savings goals and debt repayments, and 30% is for what you want to spend money on (entertainment and luxury, etc.). Because this rule is worked out in percentages, it makes sense even when your income rises or falls.
Pay yourself first. When your income lands, make sure that you have an immediate, automated payment direct to your savings or financial goals. Invest in yourself and remove the temptation to spend your money on less important things.
Build up your credit history
If you don’t already have one, it could be time to get a credit card or start a new credit account. If your credit score is low, it may be challenging to get accepted but there are normally providers who have options for you. For example, there are credit-builder credit cards, or check out Loqbox like we mentioned earlier. Whatever you decide, using credit responsibly will help to grow your credit score.