Your Credit Report: A Must-Have Divorce Document
Your credit report: an easy way to create a list of all individual and joint credit accounts.
During divorce, you will be asked to gather a wide variety of documentation that relates to your current financial picture. Thanks to the Fair Credit Reporting Act of 2003, every individual is entitled to access their free credit report once in a 12-month period from each of the three nationwide credit reporting agencies – Experian, Equifax, and TransUnion. The website authorized by the government to provide these free reports is www.annualcreditreport.com.
Your credit report is a free and easy way to pull together an organized list of all credit accounts that have been opened and titled in individual and joint names. It will also list companies where you may be an authorized user on your spouse’s credit. An authorized user can charge on the credit account but has no ownership and, therefore, is not liable to repay the debt. Although you may not be on the hook to repay the debt to the lender, this does not necessarily absolve you of marital responsibility when dividing up the marital property.
Credit Reports Contain a Wealth of Information
Credit reports have a wealth of significant information such as where you live and work and current and previous companies where you have credit or a loan. You can see the date credit was established, original credit amount, recent balance due, and monthly payment history. It will also show potentially negative items such as past due accounts, delinquencies, charge-offs, unpaid tax liens, judgments, and bankruptcies. It is wise to perform a periodic review to be sure your information is accurate, since it is used to evaluate future applications for credit, insurance, employment, or rental/purchase of a home. Regular review can also help detect errors and unauthorized activity. If you notice any inaccuracies, you can dispute the items so they can be researched and resolved.
Initially, during the divorce financial discovery process, I suggest only requesting one copy of your free credit report from one of the three agencies. This way, if it becomes necessary throughout the year to request another report from a different agency, you still have the ability to do so.
Obtaining Your Credit Score
Obtaining your credit score is not included in the entitled free credit reports offered annually through the Fair Credit Reporting Act of 2003. You will have to pay a fee for this information. Your credit score is a three-digit number calculated from your credit report. The score is determined by factors such as: your payment history, length of credit history, types of credit, outstanding balance, and how recent credit may have been established. This score is used by a lender to determine your financial solvency and ability to repay a loan. Most credit scores operate within the range of 301 – 850. Certainly, the higher the number the more positive your score, which in turn translates into qualifying for a loan and paying a lower interest rate. There is no set scale that all lenders use; each lender has their own standards on how they define a good credit score. If you will be applying for additional credit, the lender will usually require your credit score, so you may want to wait until that time to pay for the report.
If you and your spouse are working toward an amicable divorce, then exchanging information related to your financial, employment, and personal situations should not be an issue. If your divorce is more contentious, your attorney may need to request this information during the discovery process. Make sure that a copy of your spouse’s credit report is included on the list of requested documents. Also, please note that falsely accessing another person’s credit history constitutes fraud and identity theft, which could result in fines and jail time under federal and state law. Stay above board and go through the proper channels when collecting your spouse’s financial information.
Donna Cheswick is a financial advisor, certified divorce financial analyst, and trained divorce mediator.