Protecting
your credit before the divorce
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.
Article Directory: http://www.articlecube.com 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 click here. To join our
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