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How much do credit scores drop with a mortgage late payment?

FICOIn the last few years Trans Union, Experian and Equifax have disclosed more specific information about the damage to credit scores after mortgage late payments.  Here are some examples for a FICO credit score:

30 day late payment – damage to credit score

780 score drops to around a 670-690
720 score drops to around a 630-650

90 day late payment – damage to credit score

780 score drops to around a 650-670
720 score drops to around a 610-630

Foreclosure – damage to credit score

780 score could drop to 620-640.
720 score could drop to 570-590.

How much do credit scores drop with a mortgage late payment?

Notice how much risk is attached to a consumer with a recent 90 day late payment;  even with a start point of a 780 credit score, a 90 day late payment is not much different in impact than a foreclosure!

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How to Maintain Good Credit Through A Divorce

How to Maintain Good Credit Through A Divorce

Divorce Credit Split

Maintaining your good credit rating through a divorce can require more forethought than some assume.   Even your credit report can’t tell you every account your spouse may have opened, but it is absolutely a report you want to see.  Debt should be divided evenly.

How to Divorce Credit that is not yours

When vacating a marriage you have communal property and communal debt.  When anyone in the marriage obtained credit during your marriage, you and your spouse became engaged in a contract agreeing to pay the creditor. A divorce decree does not change that contract. When you divorce, each of you remains fully liable for your all of the debts on each of your individual credit reports.  Make a list of all the accounts that need to be closed.

What Credit Will You Keep Through Your Divorce?

There are several ways to prevent credit obligations from making divorce more difficult than it already is.  There are also a few things you can do to re-establish your own distinct credit lines after divorce occurs.

  • Communicate with your soon-to-be-ex-spouse.

Make a clean and thorough financial list.  Order a credit report and take an inventory of all the accounts the marriage has created.  Make a post divorce budget for each with attention to each parties individual income and ability to make payments.  You may want to close joint bank accounts immediately.

  • Communicate with your creditors.

Decide which debt belongs to whom, and then ask each company and bank that extended you credit to transfer the debt to the name of the person who will be responsible. In some instances you may need to close the account entirely and open up new individual accounts, or freeze accounts that cannot be separated.  If you have to keep joint accounts, have the creditor send you statements even if your spouse is to make all future payments.  If your spouse fails to pay or declares bankruptcy you will be required to pay the joint debt.

  • Do the right thing for yourself.

Establish at least one new trade line as an individual.  Maybe get your own credit card but do not let the balance exceed 29% of the credit limit.

If you are worried about your spouse borrowing money in your name then you could enroll in a credit monitoring service so you will be informed of all changes to your credit report.

During divorce negotiations, keep your joint bills current, even if you ultimately will have no responsibility for the debt. If you don’t, the missed payments will become part of your credit history, and your creditors could become more reluctant to release one party from joint liability.  Remember, always receive monthly statements for every account you are on, and read them!

Ask the credit grantor to remove your spouse’s name as an authorized user or close the joint account to avoid additional charges.  Authorized users are able to charge onto the account but are not responsible for the repayment of the bill.

Inform all creditors, in writing, that you are not responsible for debts charged by your ex-spouse on joint accounts after the divorce and close as many of the joint accounts as possible. Follow up by calling the company and asking them to note your account.  Ask them to email you confirmation that they noted the account.  This may not prevent them from trying to collect from you, but it does show that you attempted to act responsibly.

Even if your ex spouse is responsible for payment of an account that you are on, if payment is not made or they file bankruptcy on the account, the creditors will come after you for repayment.  The creditors will not care what the divorce decree states if the debt was initiated by both of you.  You may want to include remedies in you divorce settlement to cover situations of this nature, such as having property or funds put into escrow until debts are paid.  But these ideas are for the purpose of discussion and do not constitute legal advice.  But I do believe the thought process ideally goes like this:

  1. Close all joint accounts
  2. If you can’t do that, have someone refinance the debt into their name alone
  3. If you can’t do that, sell the property
  4. If you can’t do that, cover yourself.  All of yourself.

With questions call me at 918-949-7248.  I can get you there!

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