Considering Divorce? Here Are Tips To Help You Protect Your Credit

A looming divorce can be stressful on anyone and in the
heat of the moment people who once shared love and respect
can do terrible hurtful things to each other. If care is
not taken during this stressful time, divorcees can find
themselves in hot water later on down the track, worse
still it is possible that serious damage can be done to an
individual's credit rating. It is in your best interest to
make sure that your credit and good name are protected
before, during and after divorce. By taking a few
precautionary steps, and having a solid understanding of
the way your accounts work, before the divorce begins will
mean that a recent divorcee wont have quite so many pieces
to pick up after the divorce is over.Plan ahead and nip any
chance of damage to your credit in the bud, before it gets
serious.

Understanding Your Accounts

There are two main types of accounts. These are called
individual and joint and we will address them in detail in
the course of this article. One person owns an individual
account and, in order to have the account, that person's
income, assets and credit file are used as a decider of
whether the person is eligible. The lending institution
does not factor the possibility of a partner into the
person's financial obligations or assets when deciding to
give an applicant an individual credit account. What this
essentially means is that the person who owns the account
is responsible for the payment of the account, not a second
party. This individual account will be noted in your credit
history and never in your partners if they are not the
holder of the individual account. Always research the
situation because this is where things can get tricky. If
you live in a community property state, all debts,
regardless of their type, are included as joint
responsibility while two people are married. This means
that if you are married and your partner has an individual
account on which a large debt is owed, even though you are
not responsible for the debt, it becomes your
responsibility anyway. Even worse, this debt will be
included in your credit report, which can be damaging if
your partner doesn't pay it. An individual account can have
its good points as well as bad. If you don't work or have a
very low income, it can be difficult to get credit because
your income won't support it. Some times, in this
situation, the only way to get credit is to be included or
include your partner on the account or start a joint
account together.

Individual accounts and authorized users

If you have already got an individual account, it is
possible to add an authorized user. An authorized user is
someone that has access to your account at his or her
convenience. But keep in mind that if you include another
person in your individual account, you are still the only
person who is responsible for the account. This means that
any debts that are owed are the account holder's
responsibility, not the authorized user that has been
included.

Joint Accounts

If married couples apply for credit together, then they are
jointly responsible for any debt that is incurred on the
account. While things are going well in a relationship,
this form of credit account can be ideal. The chances of
getting credit are more likely because both parties can
offer assets and income to the deal. The problem with joint
accounts is that when a couple decide to divorce, it is
possible that your partner may run up a huge bill, or stop
paying their share of the payments that you both are
responsible for. If payments on the account aren't made,
then this could ruin your credit.

How to protect yourself

With an individual account that has an authorized user, the
holder of the account should immediately request that the
authorized user be removed from the account and that their
card be revoked. Because you are the primary cardholder,
you are completely within your rights to do this. If you
have a joint account you should request that the account be
closed immediately before any damage can be done. If there
is a balance owing on the account, then you should request
that half of the balance be put into an individual account
for each person. A lending institution is not allowed to
close an account simply because a married couple have
divorced or are contemplating divorce. However, if one of
the people in the couple requests that the account be
closed, then the lending institution is allowed to make the
changes. If divorce is on the horizon, it is important to
address this issue immediately since lending institutions
are not required to change joint accounts to individual
ones, but may choose to do so at their own discretion.
Lending institutions may request that each party re-apply
for their credit accounts again. If this happens, it is
possible that the lending institution may deny credit to
one or both of the account holders if their income is
insufficient or their credit report is blemished.

Prevention, the best cure

If divorce is looming for a couple, the best thing to
remember is that prevention is the best cure. By closing
accounts or removing authorized users, it gives you a
better chance at keeping your credit intact and on track.
If you can talk to your partner, then try to resolve credit
issues and make changes to your accounts. Whether or not
you can talk to your partner, you should make fair and
reasonable plans that keep both yours and your partner's
best interest at heart. It is also important to remember
that if you are required to pay debts incurred on credit
and the payments are not made on time, then you run the
risk of these appearing on your credit report. Once you
have ruined your credit rating, it takes a long time and a
lot of hard work to repair it. Keep your credit survival in
mind and prevent problems before they occur.

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Liz Roberts is a loan consultant with NewHorizon Finance
and has been providing consumers and business owners with
financing since 1989. For a list of bad credit credit
cards please visit this site
http://www.newhorizon.org/Info/unsecured.htm . To join our
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