Divorce isn’t something couples usually plan for, but it’s a reality many face. Alongside the emotional weight, divorce brings dozens of practical changes to your everyday life, and reorganizing your finances is one of the biggest.
If you’re currently experiencing, preparing for, or managing the aftermath of a divorce, here’s an important consideration that may not have come to mind: Can divorce impact your credit score?
And if so, how significant is the impact?
Below, we break down how your credit score may change if you’re going through a divorce and the steps you can take to protect it.
Yes, divorce can impact your credit score. But don’t panic—your score isn’t automatically headed south. It all depends on your unique situation. In fact, there’s no guarantee divorce will negatively impact your credit score at all. In some cases, it can actually improve. Let’s take a look at the specific factors potentially impacting your credit score during a divorce.
Depending on who earned what while you were married, your household income will typically shift after a divorce. This, in turn, changes your debt-to-income ratio (DTI), a determining factor in calculating your credit score.
Your DTI measures how much of your income goes toward paying debt each month. A lower DTI is better and generally has a positive effect on your credit score.
Let’s take a look at how DTI is calculated:
Say you and your spouse both earn $100,000, meaning the household income is $200,000. You have a combined $20,000 in debt, which is in both of your names. Your DTI is 10%.
Now, let’s say you split, and your new household income becomes $100,000 (your individual income), but that $20,000 debt still remains in your name. Now, your DTI increases to 20%, as a result of a lower household income—not because the debt itself increased.
But keep in mind, if you have less debt and/or your household income remains the same post-divorce (maybe you were the sole provider), your DTI may stay the same or even improve.
As you untangle your family’s financial web, things can get messy, and it can be hard to stay on top of all financial responsibilities—especially if you’re opening or closing accounts. It’s not unusual for separating spouses to miss a payment while going through the process of divorce, especially if it’s unclear (or there’s discontentment) regarding who’s responsible for what payment.
Even a single missed or late payment can negatively impact your credit score, and several can make it worse.
As you adjust to life after divorce, you may be forced to rebuild some aspects of your life from the ground up. Whether you’re buying a new home, renting an apartment, or opening a new credit card, your lender or landlord will likely do a hard inquiry on your credit report.
A single hard inquiry here or there rarely harms your score, but multiple inquiries in a short amount of time (say, the months following a divorce) could have a greater impact.
Credit utilization refers to the portion of your total available credit currently in use, and it plays a significant role in raising or lowering your credit score.
If your credit limit is $20,000, for example, but you have a $10,000 balance on your credit card, your credit utilization is 50%. Maintaining a 30% or lower credit utilization is recommended to keep a healthy credit score.1
If you’re closing joint credit cards, your total available credit will decrease, meaning your credit utilization score can increase—and your credit score may be negatively affected. Closing any credit card can also negatively impact your score due to a reduced credit mix, which is the variety of credit accounts in your name.
Consider also, as an individual, you might be spending less than you did as a couple. If that ends up being the case, your credit utilization score might actually stay the same or decrease—and your credit score may be minimally impacted or even improved.
It’s not unheard of for one partner to be more financially savvy or knowledgeable than the other. Everyone brings their unique money views, values, and habits to a relationship. Some people may be more diligent savers, while others are impulse spenders. Or, if a couple divvies up household responsibilities, one spouse may just be more familiar with the family’s financial landscape than the other.
If your partner was the one who kept your family’s finances in check, navigating these new responsibilities on your own can be challenging. You may be forced to form some new financial habits from scratch, which means mistakes are bound to happen that could impact your credit score.
While it might feel like your credit score is under attack during a divorce, don’t worry—you can take steps to help fight back. Here’s how you can give your score some armor and rebuild it if it takes a hit.
A credit lock restricts access to your credit report, meaning lenders can’t view your credit or run a hard inquiry. This prevents your spouse from opening an account or line of credit in your name. Even with a credit freeze, keep tabs on your score. If you notice anything that doesn’t seem right, you have the option to appeal it.
To make up for your decreased total available credit after a divorce, you can request a limit increase from your credit card companies. The purpose here isn’t to encourage more credit usage (and increase debt) but to protect and improve your credit utilization to boost your credit score.
To ensure that only you have access to your credit, remove your spouse from your credit card if they’re an authorized user. That way, you can control your credit and prevent unwanted debt from piling up. In addition, you’ll want to close any joint lines of credit.
A word of caution here: Consult your lawyer before attempting to close a joint account or otherwise limiting your spouse’s access to certain assets. Closing certain accounts (like a joint bank account) may land you in legal hot water.
If you have joint debt, prioritize paying this down ASAP. Things will only get more complicated down the line as your lives continue to separate. Ideally, the two of you should find a way to split the responsibilities evenly to pay down debt that was acquired jointly.
Creditors are not obligated to honor the divorce decree that a judge signs when finalizing your divorce. If your ex-spouse manages to take on debt or misses payments on loans that have your name on them, you can still be on the hook, and your credit can be affected as well.
Prioritize making debt repayments on time every month. Aim to pay at least the minimum payment, though on high-interest debt like credit cards, you’ll benefit from paying off the full amount each month if you’re able.
When rebuilding your credit score post-divorce (or anytime it takes a dip), this is key. Consistent, on-time payments show that you’re responsible with credit. Keep this up, and with time, you’ll notice your score improving.
Divorce is never easy, and it can take a toll on your mental health, your credit score, and your finances as a whole. By understanding the specific challenges (and even opportunities) at play, you can take steps to safeguard your financial future and bounce back quickly. If you need help figuring it all out, it may be helpful to speak with a financial professional who specializes in divorce and can walk you through the process.