Divorce in Texas includes dividing a couple’s marital debts and assets. As noted by Realtor.com, if an individual wishes to take ownership of a shared home after a divorce, it generally requires a new mortgage. The division of assets during a divorce may, however, affect an individual’s ability to refinance a mortgage or apply for future credit.
Refinancing allows lenders to review a single borrower’s income and debt-to-income ratio. A new loan releases an ex-spouse from payments, and the new account does not appear on his or her credit report. Experian notes that previous late payments on an existing home loan or joint account may affect an ex-spouse’s credit score.
Dividing joint debts and assets to maintain credit
As reported by CNBC, when divorcing couples close joint credit card accounts, it could affect each individual’s credit utilization ratio. This ratio reveals how much total available credit an individual has compared to the amount spent. According to Experian, 30% of an individual’s credit score consists of available balances spent within the cards’ limits.
Before one spouse applies for a new home loan, couples may discuss dividing their joint account balances as part of their divorce agreement. A spouse may, for example, agree to continue paying a joint debt in exchange for full ownership of a shared marital asset. Negotiating household debt division may allow an ex-spouse to maintain a credit score that qualifies for a mortgage.
Removing spouses added as authorized users
Individuals who added their spouse as an authorized user to their own credit card accounts may remove them when they wish. An authorized user’s credit utilization may then show as decreased, which could result in a lowered credit score that reflects less available credit.
Spouses may discuss closing joint accounts. They may also consider paying them off with funds obtained from the couple’s marital property.