San Diego, CA - The number
of American couples going through a divorce or legal
separation in America is unprecedented. Also, people
involved, both females and males, are making unwise
decisions about shared finances and other assets that may
harm their credit rating now and in the future, perhaps
for as long as 20 or 30 years, says the nonprofit
Institute of Consumer Financial Education (ICFE) an award
winning, education foundation based in San Diego, CA.
Since 1982, the ICFE has been helping consumers of all
ages improve their spending practices and habits, increase
their savings accumulation and use credit more wisely.
Even if you are just thinking about separation or a divorce in the future, financially speaking, it is time to begin thinking like a single person. For some childless, houseless couples, it's till debt do us part and separating things may be relatively easy. For those with children, however, and/or real estate, it is much different. There may be months of meetings with lawyers on both sides negotiating the differences. Also, in addition to new and increased financial obligations as the divorce approaches, there are new buzzwords and phases to learn the true meaning of, like child support and 100% liable for debts and bills.
No matter the circumstances of separation or dissolution of a marriage, many decisions have to be made which will immediately and directly affect the credit ratings and scores of both parties. Among them are separating shared bank accounts, shared credit card accounts, shared insurance coverage, establishing utilities in your own name, changing the guarantors of motor vehicle loans and the titles to those vehicles, in addition to real estate mortgages and ownership in real estate, among many others.
Neither party should fall for the line 100% liable for debts and bills because unless your creditors agree to it, they won't let you off the hook. Further, if you do allow your former mate to 100% liable for debts and bills and payments, even ordered by the court are not made in a timely manner, guess what? It's your credit rating and score that may be harmed, not necessarily theirs. Putting off separating jointly held checking, savings and credit card accounts now, may preclude you from getting credit on your own in the future.
It's usually women who suffer the most financially in a separation or divorce because they are often unemployed or on a fixed income and have little or no savings of their own. Because of their financial situation, they often allow their ex-spouse to assume the insurance, mortgage or car payments, thinking they are financially off the hook. Not necessarily so. Here is an example. At the time of divorce, the mortgage had 25 years remaining and one party kept the house and has made the payments on time. Now the other party, 15 years later, wants to purchase their own home and was denied a mortgage because they are a signor on the mortgage with a former spouse, who can't afford to refinance that mortgage. So the wanna be home buyer is stuck. This typical situation may be avoided at the time of divorce by requiring the party who wants to keep real estate to refinance it. Otherwise put it on the market and pay off your mortgage obligation. Do the same with motor vehicles, if one cannot afford to refinance it, then sell them and pay off your loan obligations.
Take some steps to protect yourself if you are contemplating separation or divorce.
1) Learn what lenders see in your credit report by ordering a copy today either on-line or by phone to the three major credit reporting agencies: Experian (1-888-397-3742), Equifax (1-800-685-1111) or TransUnion (1-800-888-4213).
2) Begin to separate and/or close out shared and joint accounts, including checking, savings, IRA's and charge cards, doctors and dentists, health care and life insurance. Also motor vehicle loans, real estate mortgages and student loans, etc. Some separation of car loans or home mortgages may require refinancing or an outright sale in order to pay off your loan obligations.
3) Make all your payments ahead of the due date. Missing or being late on a payment, even to the phone company, a book or music club, can be very costly if it makes it on to your credit report. It may be much more than a $30 or $40 late payment fee, because of a clause that may be in your credit card or other loan agreements known as universal default. In essence, it stipulates if you are late on one account you are late on this one too. It may also trigger much higher fees and interest charges and it will also lower credit scores. Prevention is easy. Pay all your own monthly obligations, at least a week or more ahead of the payment due date.
The ICFE Resource Center (www.icfe.info) has three books covering divorce and finances.
1) Stop Fighting About Money (And start making it work for you) $10.
2) Fair Share Divorce for Women $20.
3) Divorce and Money $35.
If you are experiencing difficulty with your credit record or making all of your payments on time, there is help available on spending, credit reports, credit scoring and credit repair from the ICFE online at www.icfe.info
To receive the same information by mail, please send $1 and a 60 cent SASE to: ICFE PO box 34070, San Diego, CA 92163 and request the specific information you want to receive.