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Relationships don’t always work out as we want them to, and separating from a spouse can be averyemotionaland long-winding process. This is particularly true when financial obligations are at the core of allproblems and need to be reorganised.
Divorce and your credit score
Changing the legal status of your relationship does not affect your credit scoredirectly. Whether you’renewlyweds, recently divorced or in a legal partnership, this doesn’t show up on your creditreport anddoesn’t affect your credit score.
However, it is likely that during your relationship you’ve had financialagreements in both of yournames,for example, a mortgage, a loan or other forms of finance. Taking out shared finance withsomeone makesyou‘financialassociates’. These shared agreements show upon your report and could potentially affect yourcredit score, as a potential lender may look at both your and your associate’s creditreports when youmakenew applications for credit.
Divorce and financial association
When you apply for a shared credit agreement with someone, they become your ‘financialassociate’. Eachapplicant’s credit report then shows a link to each of those associates. It is important toknow that afinancial association isn’t bound to marriage or any other relationship status; it onlyrefers to ashared credit agreement betweenpeople. The end of a relationship – divorce or otherwise – has noinfluence on the financial association, so the link can generally only be removed when theshared creditagreement isended.
Financial dissociation
To unlink a financial associate from your creditreport you need to:
- Close all shared accounts or convert them into individual accounts where necessary. Inthe case ofdivorceyou need to sort out the division of assets beforehand. A divorce mediator can help withsplittingup assetsfairly and out of court. Alternatively, a solicitor can help when communication hasbroken down orthedivorce is not amicable.
- Once all shared accounts are converted or closed, contact the credit reference agenciesand requestthefinancial link to be removed from your credit report. If the only shared agreement is amortgage andyouhave not made any joint applications together, you may still be able to remove thefinancialassociation.Until the financial association is removed, financial actions from your associate couldpotentiallyimpactyour own credit report. When you’re looking for new credit the lender might take theircredit reportintoconsideration too.
Remember, your relationship status is not the deciding factor for a financial association -you can be inahealthy relationship and still want to disassociate from your partner for various reasons,for example,whenthe loan you once had is paid back in full.
Divorce and mortgage
When you have taken out a mortgage together but your relationship ends in divorce, thereusually areseveraloptions for what happens to the property. Given that you can agree with your ex-spouse onhow toproceed,Citizens Advice states that youcould sellyour home and split the equity, or that you could stay in yourhome and take over the mortgage payments if you can afford it. If you want to keep yourhome, theysuggestthat you speak to your mortgage lender directly, so they can check if you can afford thepayments or ifanew payment plan needs to be put in place. Once that is settled a solicitor can go ahead andtransferownership of the property to your name.
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