COMMON CREDIT REPORT ISSUES RESULTING FROM DIVORCE
The divorce process can be very stressful, particularly when you are faced with significant marital debts. No matter what stage you find yourself in the process, you should take steps to protect your credit and credit score. The Fair and Accurate Credit Transaction Act allows consumers to obtain one free copy of their credit report on an annual from all three bureaus: Transunion, Equifax and Experian. These reports can be obtained online or by mail at www.annualcreditreport.com. Review of your credit report will not only protect you against identity theft. It will also provide you with the status of existing debts, and make sure that no debt has been overlooked.
Missed mortgage payments: When spouses who are jointly obligated on a mortgage are going through a divorce, missed mortgage payments are not uncommon. The consequences of a delinquency on a mortgage obligations can negatively affect a credit score by as much as one hundred points. According to the Fair Credit Reporting Act, negative reports may remain on your credit report for up to seven years. Payment history is the most influential component of a credit score, followed by the amount of debt owed. Just because you are no longer residing in the marital residence and are willing to transfer ownership of the property to your spouse does not mean that you are entitled to have your name removed from the mortgage obligation. The only options a spouse has to remove their name from a joint mortgage obligation are refinance by the spouse remaining in the property or sale of the property to a third party. In rare instances, a spouse may be permitted to assume or take over an existing mortgage.
Joint credit card obligations: A careful review of your credit report will reveal whether a spouse is jointly liable or an authorized user on an account. If the spouse who is responsible for the payment of a particular debt misses a payment or defaults on a joint obligation, the credit score of both spouses with be negatively affected. In order to avoid liability for default or escalating balances after separation or divorce, you must send written notice to the creditor advising them of the separation or divorce and requesting either that they remove your name from a joint obligation or remove the name of the spouse who is an authorized user.
Foreclosure of marital residence: Foreclosure proceedings may commence after a few months of missed mortgage payments. If that occurs, your options may be limited to loan modification or reinstatement of the mortgage in order to prevent the matter from proceeding to a sheriff sale. Foreclosure will negatively affect your credit score and impair your ability to obtain new financing for several years.
Disputing errors on your credit report: Errors common on a credit report, regardless of marital status, include inaccurate reporting of delinquency or date of last payment, reporting a debt that is too old to be reported, inaccurate payment history, inaccurate balances and unauthorized inquiries. These errors will affect your credit score and impact your ability to obtain new credit. The Fair Credit Reporting Act establishes a specific procedure for disputing errors on your credit report. The instructions for submitting a dispute, which can be made online or in the mail, appear on the final pages of your credit report. The dispute must be made to each credit reporting agency that issued the incorrect report, and must identify the account in dispute, explain what is wrong with the information reported, and attach copies of supporting documentation. It is also a good idea to confirm your identity by including a copy of a government issued photo identification and social security card with the dispute letter. If the letter is mailed, it should be sent certified with return receipt requested.
If the dispute letter does not produce the desired effect after the credit reporting bureau has had adequate time to investigate, you should seek the advice of an attorney regarding a violation of the Fair Credit Reporting Act.