While the recent article in the Financial Post – ‘No safety net’: How a divorce rips a tornado through your finances, and what to do about it – doesn’t focus on credit after divorce is a good glimpse at what happens to your otherwise stable financial situation after divorce.
“Reaching beyond the obvious emotional implications though, a major consequence of
divorce is the absolute tornado it rips through your finances.
“Few couples realize that no matter how conscious the uncoupling, no matter how determined they are to dissolve their marriage congenially, their finances are likely to be, if not decimated, then at minimum thrown into disarray.”
The article goes on to discuss further the things to consider when going through the process – i.e. look for alternatives to litigation. For example, regardless of how amicable your divorce, you can use a Divorce Mediator and save substantial on legal costs.
What the article doesn’t cover is credit after divorce. Without good credit, financing for the purposes of buying home or a car will be difficult.
Financing is much, much more than just do you have the income to support the new debt repayments but unfortunately not everyone understands this. While I would never suggest that you talk about the end of your marriage like it’s inevitable, rather you should protect yourself at all stages of your life.
No matter how healthy your relationship is, make sure you have at least two forms of credit (credit cards, lines of credit, personal loans etc.) in your name and NOT joint with your spouse. When it’s joint, if there ever comes a when you decouple that joint credit, you will be left with no credit that is active. Lenders want to see at least two forms of credit reporting for at least two years.
Another thing to consider is income. If you’ve been a stay at home parent, and will receive spousal and child support, most lenders will not lend on 100% support income. You’ll need to have employment income as well. Again, I hate to plan for something to end, but you also need to protect yourself.
If you have questions about credit after divorce and the possibility of qualifying for a mortgage on your own, contact me (403-804-7002).
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