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Divorce and Credit Cards
In addition to your marriage being an emotional relationship, it has also been a financial partnership. Now that you are divorcing, be sure you get a financial divorce as well. To complete the process, all three credit reporting agencies must reflect your new individual financial status.
Early in the divorce process, pull up to date credit reports from each of the three credit reporting agencies: Equifax, Experian, and Transunion. All three are necessary because they likely will have differences in their reported content and you want to be sure to cover everything. It would not serve you well to have two accurate credit reports and encounter a prospective lender in the future who depends upon the third for their determinations of your credit worthiness.
Your purpose should be two-fold, identify those accounts that need to be "divorced" and assure that you will have at least two individual credit cards, of your own, post-divorce. You may have developed habits during the marriage of thinking of one card or another as "yours" and others as "his/hers." Or you might rationalize that only you have ever used a particular card. That doesn't matter. What matters is how the cards are registered with the card issuer.
There are three possible ways a personal credit card might have been issued:
- Individually, to one person, and that person is the only user of the card. If you have at least two of these, continue to protect the good status of those cards and plan on retaining them post-divorce for your continued use. I recommend at least two because it is not unusual to have a card become compromised, through no fault of your own, but it will then be closed by the issuer and you will be without access to credit until they are able to issue you a new card, usually about ten days. Having two or more cards also provides you with more flexibility if a merchant places a "hold" against your card for more than the anticipated amount of a large charge. Hotels usually do this prior to the actual time of the charge.
- Individually, to one person, with one or more additional "authorized users." If you are the individual to whom the card was issued, consider this as one of your individual cards to continue with post-divorce. However, be sure to remove your ex-spouse who may have been an authorized user. This is also a good time to reconsider any other authorized users, adult children, siblings, etc. and determine if it continues to be in your best interest to have these responsibilities. If you are the spouse who has been the authorized user on a card, anticipate being removed and left without the use of this card.
- Jointly to both spouses. I recommend that any joint cards be closed so as to assure that you completely end any joint responsibilities and/or vulnerabilities subject to your ex-spouse's future financial risks. It is not enough to request that the title on the card be modified to one or the other of you. The fact remains that the line of credit was issued jointly and the standing contract, to that effect, remains in place regardless of any subsequent requests for changes. It is likely that the requested change will not be completed and you will remain financially attached to your ex-spouse.
Where possible, all joint credit card balances should be paid in full with marital funds. If funds are not available to pay off these debts, they will be assigned to one or both of you in the division of the marital estate. However, the assignment of joint debt to one of you does not relieve the other of joint responsibility in the eyes of the creditor. Your original contract with them assigned equal responsibility to each of you. Therefore, if your ex-spouse fails to make payments on debts assigned to them in the divorce decree, the creditor may still pursue you for payment. Your creditor is not a party to your divorce decree, and they are not bound by it. You still remain at risk until the balance is paid in full. You can "close" the credit card account while the balance is being paid off so that no new charges occur and it is completely closed, with no further action, upon payment in full.
If you have a number of merchant-specific credit cards that seemed like a good idea at the time, due to an immediate promotional discount on purchases, reconsider the role they play in your financial profile. If the same merchant accepts the major credit cards, consider closing the merchant cards. Such merchant cards can dilute your credit worthiness and reflect negatively upon your financial responsibility because they were applied for on impulse.
After the disposition of all credit cards has been determined, and acted upon accordingly, be sure to monitor your three credit reports until all changes are correctly recorded on each of them. The extra effort is worth it to assure that you effectively have a "financial divorce" in addition to your legal divorce.