Divorce and Credit Score: how to protect yourself

 

Vector good and bad credit direction concept

 

When talking about one’s divorce and credit score, a story of Donald Trump’s imminent bankruptcy during the early 90-ies comes to mind. In the midst of marriage breakdown and real estate downturn Mr.Trump was unable to make loan payments and his lenders lost millions of interest dollars. Mr. Trump survived: the Manhattan’s bankers got together, restructured the loans and effectively bailed out the real estate tycoon from his financial trouble.

Another story of “such kind” is about regular bank client I happened to work with. Patrick (not his real name) was a hard-working manager with a middle class income. He was always saving money and paying his debts on time. Unfortunately, Patrick went through a tough marriage split and all of his property along with his debts had to be divided. A small balance of $12.53 on a credit card his ex-wife was using as a secondary user was missed during the settlement. In fact the card was showing “$0” at the time of settlement, but the payment protector insurance charges got added up after the inquiry and the card remained opened for years “due to unpaid balance”.

Nobody had contacted Patrick about this issue and the debt was “written off” with a “R9” recorded with the Credit Bureau. Sadly, writing off this debt and tarnishing one’s credit history was easier for the bank than spending time on resolving the issue.

Had we not checked Patrick’s credit score 11 months in advance, he could have faced a grim reality of his mortgage application being declined by the first class lenders. It’s shocking how a small thing could have cost a hard-working and honest guy thousands of dollars of extra interest at best and the full amount of his deposit at worst.

There are several things you can do to keep your credit as good as possible. Check your credit report, de-clutter small balances by paying them off, close non-essential cards that you rarely use, pay all your debts on time, try to have outstanding balances as far from the limit authorized as possible and keep third-party credit checks on you to a minimum. No NSF cheques please!

Keep on top of the bank’s and CMHC lending guidelines and have a good mortgage professional working for you early in the process. If you can avoid divorce – please do and do something sweet for your partner. Today.

Your’s truly,
Tatiana Terekhova, Divorce Financial Analyst
FAIRSPLIT INC.
Divorce & Separation Financial Solutions

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