If you are in the process of getting a divorce or separation, it will be important to pay special attention to the status of your credit accounts and credit card debt. If you
have joint accounts with your spouse, it's important to make regular payments so you don't end up with bad credit. As long as there is a outstanding balance on a joint account, you and your spouse
are responsible for paying it.
Knowing and understanding the different kinds of credit accounts opened during a marriage may help you understand the potential benefits and negative effects of each. There are two types of credit
accounts, which are individual and joint. You can permit authorized user to use the account with either.
When you apply for credit, such as a credit card or a mortgage loan, you will have to choose from the two types of credit accounts.
The first type is a individual account in which your income, assets, and credit history are considered by the creditor. Whether you are married or single, you alone are responsible for paying off the
debt. The account will appear on your credit report, and may appear on the credit report of any "authorized" user. However, if you live in a community property state (Arizona, California, Idaho,
Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin), you and your spouse may be responsible for debts incurred during the marriage, and the individual debts of one spouse may appear on
the credit report of the other. A individual account can have its advantages and disadvantages. If you're not employed outside the home, work part-time, or have a low-paying job, it may be difficult
to demonstrate a strong financial picture without your spouse's income. However, if you open an account in your name and are responsible, no one can negatively affect your credit record.
The second type is a joint Account in which your income, financial assets, and credit history (along with your spouse's) are considered for credit. Both you and your spouse are responsible for joint
account debts. A creditor who reports the credit history of a joint account to credit bureaus must report it in both names (if the account was opened after June 1, 1977). A joint account has its
advantages and disadvantages. An application combining the financial resources of two people may present a stronger case to a creditor who is granting a loan or credit card. However, since two people
applied together for the credit, each is responsible for the debt. This is true even if a divorce decree assigns separate debt obligations to each spouse. Former spouses who run up bills and don't
pay them can hurt their ex-partner's credit histories on jointly-held accounts.
Many consumer wonder how be added as a account user will effect their credit. If you open an individual account, you may authorize another person to use it. If you name your spouse as the authorized
user, a creditor who reports the credit history to a credit bureau must report it in your spouse's name as well as in your's (if the account was opened after June 1, 1977). A creditor also may report
the credit history in the name of any other authorized user. There are some advantages and disadvantages to this. User accounts often are opened for convenience. They benefit people who might not
qualify for credit on their own, such as students or homemakers. While these people may use the account, you and not them are contractually liable for paying the debt.
If you get a divorce, you may want to close joint accounts or accounts in which your former spouse was an authorized user or ask the creditor to change these accounts to individual accounts.
According to the law, a creditor cannot close a joint account because of a change in marital status, but can do so at the request of either spouse. A creditor, however, does not have to change joint
accounts to individual accounts. The creditor can require you to reapply for credit on an individual basis and then, based on your new application, extend or deny you credit. In the case of a
mortgage or home equity loan, a lender is likely to require refinancing to remove a spouse from the obligation.
Just remember, when it comes to credit and divorce and you have joint accounts with your spouse during this time, it will be important to make regular payments so your credit record won't
suffer.