Amid the upheaval of separation and divorce, it is easy to overlook the impact they can have on your credit rating. Protecting your credit score during a divorce is vital, especially when you are trying to secure housing, refinance debts, or rebuild financial independence.

In this article, we explore the issues that may arise around credit during divorce, including association with a partner’s poor credit, lack of independent credit history, risks involved with joint mortgages, and the financial pitfalls to avoid before, during, and after separation.

Understanding financial association and credit files

In the UK, credit reference agencies such as Experian, Equifax, and TransUnion compile your credit report based on your borrowing history and financial behaviours. However, a significant aspect of your credit file is the concept of financial association.

If you have joint financial products with your spouse, such as a joint current account, loan, mortgage, or credit card, you become financially linked. This means their credit behaviour can impact your creditworthiness. If your partner has a history of missed payments, defaults, or County Court Judgments (CCJs), it may reflect negatively on your own credit file, potentially affecting your ability to get credit in the future.

What to do:

  • Obtain a copy of your credit report from all three major credit reference agencies. Look for any joint accounts or financial links with your spouse.
  • If you’re separated and no longer financially connected, ask the credit agencies to issue a notice of disassociation to remove the financial link. However, this can only be done once all joint financial products have been closed or refinanced.

When one spouse has no credit history

In many marriages, particularly those where one partner manages the household while the other earns the income, it is common for credit to be taken out in just one name. While this might be practical during the marriage, it can leave the non-borrowing spouse with little to no credit history. It might seem counterintuitive, but a limited credit file can make it difficult to:

  • Obtain a mortgage independently
  • Secure a tenancy
  • Access affordable personal loans or credit cards

This situation can be particularly problematic for individuals leaving a long-term marriage who suddenly need to rent or purchase property in their own name.

What to do:

  • Start building credit as soon as possible during the divorce process. Open a credit card in your name and use it responsibly.
  • Register on the electoral roll at your new address to boost your credit score.
  • Set up utility bills and mobile phone contracts in your own name and ensure timely payments.
  • Consider speaking with a financial advisor or credit specialist to create a personalised credit-building plan.

Joint mortgages and post-divorce risks

If you and your spouse have a joint mortgage and both names remain on the title and the loan after divorce, both parties remain equally liable for the debt, regardless of who lives in the property.

This is a key area of risk. If your ex-partner stops contributing to mortgage payments, and you cannot cover the full amount, your credit score may suffer because of missed or late payments. Worse, the property may be repossessed, and both of your credit histories will carry the mark of default.

What to do:

  • Attempt to reach a legal agreement as part of the divorce settlement about who will be responsible for the mortgage payments.
  • Consider options such as:
    • One party buying out the other and refinancing the mortgage in their sole name.
    • Selling the property and dividing the equity.
    • Establishing a deed of trust or legal charge if one party will remain in the home temporarily, such as until children reach a certain age.

UK lenders typically require a party to demonstrate that they can afford the mortgage independently before removing a name from the mortgage. So even if the financial order says one party is responsible for paying the mortgage because they remain living in the family home, for example, both parties remain liable until the mortgage is legally changed.

Risks to avoid before and during divorce

  • Co-signing new debts: Do not take on any new joint debt, co-sign loans, or extend existing credit during separation or divorce proceedings. This can further entangle your finances and create new financial links that are hard to sever.
  • Ignoring debts: Joint debts, even if used solely by one spouse, remain a shared responsibility. If your partner stops paying or disputes responsibility, creditors can pursue you for repayment. Ignoring statements or collection notices can lead to long-term credit damage.
  • Assuming verbal agreements will protect you: Informal agreements between spouses about who will pay what bills are not enforceable by banks or creditors. You must obtain legally binding agreements through your solicitors and court to protect yourself.
  • Missing payments during transitions: Divorce can be chaotic, with addresses changing and bills falling through the cracks. Missed payments—even unintentional—can hurt your credit score. Setting up direct debits or standing orders to ensure continuity of payment, can help avoid missing essential payments.

Applying for a mortgage post-divorce

After divorce, many people aim to either refinance their current mortgage in their sole name or apply for a new mortgage.

Lenders will look at:

  • Your individual credit score
  • Your income and affordability as a single applicant
  • Your existing financial obligations (e.g., child support or other debts)

If your score is impacted because of past joint finances or your ex-partner’s credit history, you may face higher interest rates, rejection of applications, or lower borrowing limits.

Remaining joint property owners after divorce

In some situations, couples remain joint owners of a property after divorce. If your ex defaults on the mortgage, you are still jointly liable.

This arrangement can only work if there is clear communication and a formal agreement in place outlining each party’s responsibilities. Consider a consent order drafted by family lawyers to set expectations and timelines for future sale or buyout.

Final thoughts

Your credit rating is a crucial part of your financial future and must be protected at all stages of separation. In the UK, where financial associations and joint debts are deeply binding, proactive steps can save you from long-term financial harm.

Most importantly, seek advice from family solicitors and financial advisors who understand the complexities of divorce. With careful planning and timely action, you can protect your credit rating and lay the groundwork for a stable financial future post-divorce.