One striking feature of Indian marriages that can be noticed from afar is the concept of arranged marriages. Although the number of love marriages is increasing, for a majority of the people, it is parents who choose a suitable mate for them. Divorce is still seen as a taboo because it is considered equivalent of going against the choice of your parents. This social stigma is the sole reason why divorce rates in India are quite low but it does not mean that the marriages are happy. The number of people who are separated is thrice of those who are divorced. But have you wondered if a divorce has an effect on other aspects of your life (other than reputation in a judgemental society)? Like perhaps your credit score? Let’s find out-
How Your Credit Score Can Be Affected When You Get Divorced
Getting divorced is not directly linked to your credit score. No bank will ever reject your loan application because you and your partner could not work your marriage out. But when you get divorced, there are a lot of changes that occur in your life. And those changes might eventually cause your credit score to fall. Here are a few things that happen after a divorce that can adversely affect your credit score-
⇒ Reduction In Income
If you and your wife were the only two earning members in your family, then your household’s net income has now reduced considerably. Although the expenses would be reduced too, your budget might take a hit when you separate with your partner. If you are the one who has been entrusted with the responsibility of clearing out existing loans, you might miss on a few EMIs given the reduction in income. This can, in turn, hurt your credit score.
⇒ Foul Vengeance
Sometimes, people do not end their relationship on a, particularly good note. This can lead to their partners seeking foul vengeance. Now even if you were not the one who defaulted on your end of the payments, your credit score will be adversely affected if any payment of EMIs on your joint loan is missed. Your partner might know this fact and use this against so you end up paying higher interest rates for no mistake of yours.
⇒ Decreased Credit Limit
When two people apply for a loan, their credit repayment capabilities are individually assessed and the loan is approved on the basis of that. Even if one of the partners lack on a few points, the other can always make up for it. After the divorce, you are on your own. Your credit limit can reduce due to that and you might also end up paying higher interest rates. Increasing your chances of overutilization of existing credit and defaults.
How To Protect Your Credit Score When You Get Divorced
Since a divorce does not directly affect your credit score, there are always ways and measures that can help you protect your credit score. Here are a few of them-
⇒ Adapt To The New Budget
Once you have gone through the legal aspects of the divorce. Sit down and analyze your budget. See where you can cut down and how you can regulate the cash flow and EMI payments. Once you have adapted to the new budget, you wouldn’t have to worry about defaulting on your payments and hence your credit score.
⇒ Make Sure They Follow Through
At the time of the divorce, both of the partners need to discuss which payments of the joint accounts will be done by whom. And once that decision has been made, ensure that they follow through the decided terms. You can also opt for setting up automated payments so you don’t have to follow up with them.
⇒ Remove Each Other From Your Credit Accounts
No matter how genuinely you two believe that you can stay friends or on good terms after the separation, do not decide to keep them on your credit accounts. Change the passwords for all the credit accounts they have access to and surrender their accounts that you were using. It is best if you do not leave a scope for a traumatic revenge experience.
So this was the impact of a divorce on your credit score. If you have any other questions that you wish to ask, do let us know in the comment section below. To check out the best offers on personal loans and credit cards, check out the IndiaLends website and app. Until next time!
