Divorce is an all too common occurrence in our society, and it’s no secret that divorce has the potential to put your finances in the toilet. Most people who divorce cannot say with complete honesty that they planned for it, but given the statistical probability, you may want to consider planning for the possibility.
How much does your ex know about you?
Few of us consider the wealth of private information that walks out the door with an ex-spouse—Social Security, credit card, checking account, driver’s license, passport and savings account numbers, not to mention your date of birth. Before you shrug it off, you should consider the array of actions that an unscrupulous individual can trigger with information like that. If you are working to improve your credit rating, the last thing you need is a curious, or worse, a vengeful former spouse mucking up your credit.
There is another aspect to this that cannot be overlooked. As long as your ex-spouse knows these personal details, your privacy is at risk. I hesitate to mention this, but it is important that parents recognize the fact that the children’s Social Security numbers are also known to both parents. There have been many cases of fraudulent accounts and identity theft involving children. While none of us would like to think a spouse capable of such a heinous act of betrayal, it is important to be aware of the possibility. It is one thing to have to raise your own credit score, and it’s another thing entirely to have to clean up credit for your innocent children.
Things You Can Do
As much as possible you want to avoid joint accounts, particularly joint credit accounts. If you and your spouse take out a loan together, be it a mortgage, credit card or auto loan, each has an equal contractual liability for repayment. This contractual liability is not affected by a subsequent divorce. Logically, you should not create a joint obligation for any debt you are unwilling to pay in the event of a divorce.
Remember, even if you have a divorce settlement that spells out in detail which spouse pays what debt, your creditor’s right to collect from both of you is preserved for any account that is a joint obligation. You may take a civil action against your ex-spouse for failing to meet the terms of the civil agreement, but the creditor is within its rights to pursue both parties for repayment.
Your best defense is regular review of your credit reports. You can do this free of charge. Help your credit and get peace of mind by taking this advice.
If you feel divorce is imminent, try to pay off active joint accounts and cancel inactive joint accounts. If you find that all or most of your accounts are joint accounts, you should begin to establish credit in your name only. This may not be difficult if your joint accounts are being paid as agreed, so it is important to establish your own credit history before any deterioration in credit standing occurs.
Placing a Fraud Alert
If you believe your ex-spouse may spy on you, steal your identity or commit some form of fraud against you by accessing your credit history, you can institute a security freeze. Until this security freeze is accomplished, you should implement a fraud alert with all three credit-reporting agencies.
The fraud alert acts as a “red flag” to lenders and will ensure that extra measures are taken to verify the authenticity of any credit request under consideration. This is a relatively easy thing to do. You can contact any one of the three credit-reporting agencies by telephone. Experian can be reached at (888) 397-3742, TransUnion at (800) 680-7289 and Equifax at (800) 525-6285. Choose just one of the three to call. They will notify the other two credit reporting agencies.
Simply advise them that you believe you are a victim of identity theft and you want a fraud alert placed on your file. The alert stays in effect for 90 days, and you can extend the alert with another call at the end of the first 90 days.
Implementing a Security Freeze
There are fees associated with a security freeze, and you will have to repeat the process with each of the three credit-reporting agencies. The procedure and the fees vary from state-to-state, so you will need to contact your State’s Attorney General to get the details for your State. Online information for contact numbers is available at www.naag.org.
Use the interactive map on the site’s home page to obtain the phone number of the Attorney General’s office in your state. Then you will have to call each credit-reporting agency (not just one), request the freeze and pay the appropriate fee (if any). Be certain to inquire about how long the freeze lasts. Use the same numbers provided for fraud alerts. Once it is activated, access to your credit history is available only to those providing the appropriate personal identification number (PIN) or password. This effectively renders all the personal information your ex-spouse has about you useless, at least in terms of credit.
Dominique Brown is a financial planner, owner of the blog YourFinancesSimplified and author of the book “How To Fix Your Credit.”
Photo courtesy Tax Credits