Credit Card Score / How to Improve Bad Credit? – Philip Tirone

Sheila learned about divorce and credit scores the hard way.

I met Sheila when she was applying for a home loan. She had a bad credit score because the mortgage on a home she bought with her ex years earlier was dangerously close to foreclosure.

Sheila explained that her ex, who kept the home, lost his job a few months after the couple separated. He was unable to pay the mortgage, which was now 120 days past due.

“I don’t understand why this should affect my credit,” said Sheila. “I have a divorce decree and a quitclaim deed. Isn’t that enough to protect myself from the problems associated with divorce and credit scores?”

I explained that the divorce decree and quitclaim deed are not enough to protect your credit. If you and your ex jointly applied for the mortgage loan, the bank considers it your joint obligation to make payments. The agreement you had with the bank remains in effect until one spouse refinances in his or her name.

If your ex keeps the home but does not refinance, your credit score will be damaged if your ex becomes late on a payment. And if you retain ownership, what happens if your ex is sued? The courts could attach a lien to your ex’s property, which could include your home!

Divorce and Credit Scores Rule #1: If you are going through a divorce, you must immediately refinance the home in the name of the spouse who retains ownership. During the transition process, protect your credit by making mortgage payments directly to the bank.