What you need to know about your credit score when separating
At Simple Separation, we want to help you prepare for your separation and provide information that is relevant at this stressful time.
We find that, in the past, our couples have not realised the importance of their personal credit score and how it can impact their financial future.
One thing you don’t want to have to stress over when separating is your credit score. It might not be something you pay much attention to during a marriage, but your credit score could have a bigger impact than you think when separating.
When separating you want to ensure your credit score remains good, as it will affect your possibility to get a loan (i.e a home loan or car loan)after your divorce.
We sat down with Linda, who recently went through a divorce, and had to find out the hard way that she wasn’t able to buy a home with her low post-marriage credit score. Take a look at her story and advice on how to protect your credit score below.
Q: Firstly, what is credit score and why is it important?
L: Your credit score is a number that can range between zero and 1200, depending on where your score was calculated, and represents your trustworthiness as a borrower. The score is important as it will help a bank or lender determine whether to accept your loan application, how much they’re willing to lend you, the loan’s interest rate, credit card limits and more. Credit scores are also used by landlords to help decide who gets to rent their apartments and by insurers to set premiums.
Q: Where do you check your credit score?
L: There are several ways to check your credit score, but keep in mind that some of the online platforms can show a higher score compared to a bank, as the check isn’t as thorough. When I first used a free online platform, my credit score came back high, but when I went to a mortgage broker my score was very low, and I was unable to get a loan to purchase a new home after my divorce.
Q: How did your marriage impact your credit score?
L: During our marriage, my husband was in charge of our finances as he was working in the finance sector and it seemed like an obvious choice. We still had our separate accounts and each month I transferred money from my account to his for him to pay our mortgage, little did I know that he didn’t pay on time and sometimes, even at all. He also refinanced our home loan and I didn’t pay too much attention to it.
Q: How has your credit score changed since your divorce?
L: I’ve always had a good credit score and paid all my bills in time, but as the mortgage for our home was in both our names, my credit score was badly affected when my ex-husband didn’t pay our bills on time. When we got divorced, I tried to get a loan to buy a new home for me and my kids, but the bank didn’t want to loan me anything given my low credit score.
Q: What can help your credit score?
L: Sadly, there’s not much I can do to improve my credit score at the moment. I have to wait two years for the banks to reconsider giving me a loan and it’s highly unlikely the same bank will lend me money again. However, not using afterpay and having a low limit on my credit card can help in the end.
Q: What did you wish you knew about credit score before your separation?
L: In hindsight, I wish I had paid more attention and been more involved in our finances as a married couple. Once I found out that he hadn’t done right by me when it came to paying our mortgage, the trust was broken, and once the trust is broken it’s hard to repair, which then also impacted other aspects of our separation.
For more information about how you can protect your credit score, do not hesitate to reach out to our team here.
Simple Separation is a complete Mediation and Legal information service that assists couples to legally finalise their separation from start to finish online. All legal services are provided by our preferred panel of the best independent Family Lawyers, Estate Planning Lawyers and Conveyancers who share the same philosophy - to separate simply, fairly and respectfully.