Divorce can mean changes in both personal relationships and financial matters. One common concern is whether it can affect credit scores.
In Minnesota, the direct act of getting a divorce does not impact credit scores. However, certain financial aspects may influence your credit standing.
1. Separation of joint accounts
When couples share credit cards, mortgages or other loans, these financial ties need cutting. Closing joint accounts or transferring balances to individual accounts helps in establishing financial independence post-divorce.
However, if these actions do not occur, then missed payments or outstanding debts on joint accounts could potentially affect credit scores. The average credit score in Minnesota is 742.
2. Credit responsibility
Minnesota follows the principle of equitable distribution in divorce proceedings, meaning the fair but not necessarily equal division of marital property. Despite this, lenders may still hold both parties responsible for joint debts. Even if a divorce decree assigns certain debts to one spouse, creditors can still pursue the other person in cases of missed payments. The responsible party needs to refinance or close joint accounts to avoid any negative impact on credit scores.
3. Credit reporting agencies
Credit reporting agencies gather information from various sources, including lenders and financial institutions. These sources may report missed payments and other financial changes that accompany divorce to credit bureaus. People undergoing divorce should monitor their credit reports for accuracy and fix any discrepancies.
Opening individual accounts, including credit cards and bank accounts, helps in creating a separate financial identity after divorce. Responsible financial management, such as making payments on time and maintaining a good credit history, helps rebuild or preserve credit scores.