There are many people on Valentine’s Day who are falling out of love, not in love. If you are going through a divorce or separation, we provide 10 steps to financial separation and show you how to keep your clear credit file from being dumped along with the relationship.
By Graham Doessel, Founder and CEO of MyCRA Credit Repairs and www.fixmybadcredit.com.au.
Savingsguide.com.au had a fantastic Valentine’s Day article titled Post-Relationship Credit, about what to do with your finances when you divorce or separate. It inspired us to let you know how that separation can affect your credit rating.
If you are in the middle of a separation, it is essential to look forward into the future to ensure that it does not impact on your credit rating and lead to a bad credit score.
Emotions are running high – and sometimes tempers as well. People often use financial ties to deliberately hurt one another.
The most important and sensible decision the two of you can make during the separation is to cut all financial ties and as early in the separation as possible.
Don’t hold on to joint accounts and assets ‘just in case’ you reconcile. Even the most amicable of separations can potentially turn sour down the track. The sooner you make the break, the better off your future will be – even if you do decide to get back together in the future.
As far as creditors are concerned if the debt is in both names, then you are both responsible for it regardless of who accrued it.
For them, there is no such thing as a broken heart, just a broke person. Your aim should be to clear that debt and repair your credit rating as soon as possible.
If you have just left your partner or spouse, here are 10 steps to financial separation you should take as early as possible in the break-up to keep your clear credit file. If these steps can be accomplished together, you can both get on with your lives as individuals without a bad credit score:
1. Cancel joint bank accounts. You could use the money from these accounts to go towards paying off any debts you may have together.
2. Pay off and cancel joint credit cards. If the debt on the card/s can’t be paid off, inform the creditor that you have separated and ask them to put a stop on the account so there may be no more transactions. They could possibly make arrangements to transfer the repayments to two separate accounts.
3. Resolve the mortgage debt. Sell the home and divide the proceedings, or sell your share of the home to your ex-spouse or vice-versa. Before this takes place, notify the bank you have separated. Make sure no further amount can be redrawn on the loan and that you receive separate statements whilst you are separated and both still own the property.
4. Transfer names on other accounts. Phones, electricity accounts, rental properties, rates, car loans and store credit should all be transferred to one name as appropriate.
5. Pay any unpaid accounts. No matter who has accrued these debts, the creditors will still see you as responsible. Ensure all accounts are paid on time while they are in both names.
6. Keep a record of all undertakings. Keep good paperwork and notes related to the separation, including cancellation or changes to any accounts for future reference.
7. Employ a good family solicitor. Legal advice is important as it relates to children, family businesses and property. Also if anything runs off course with division of debt, they can give good advice on the next course of action.
8. Notify credit reporting agencies. Let Veda Advantage, Dun & Bradstreet, or Tasmanian Collection Agency know of your separation and any steps you have taken to separate accounts to date.
9. Check your credit score. Request a copy of your credit report and check each entry. A free copy of your credit file is available every 12 months from one or more of the credit reporting agencies in Australia. This is essential particularly if settlement is drawn out over a number of years.
10. Seek help from a professional credit repairer for any defaults, writs or judgements. Once outstanding accounts accrued by your spouse are paid, there is the issue of the bad credit score which needs to be cleared so you may have the opportunity to borrow again in the future. However, dealing directly with creditors could be problematic, they will tell you that defaults are never removed but can be marked as paid. However, at the moment even ‘paid’ black marks against your name can be enough for credit refusal, particularly if you are trying to buy a new property on one income.
A professional credit repairer can check the creditor’s process of listing defaults for legislative and or compliance errors, any such errors could deem the credit file default listing unlawful, advising the creditor to remove the default.
For help with fixing credit problems following your divorce or separation, contact MyCRA Credit Repairs tollfree on 1300 667 218 or visit our main website www.mycra.com.au.