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How can divorce affect my credit?

For most people, divorce is a very difficult and emotionally challenging experience to go through.

Lawyers, mediators and counselors can be available to help navigate through making new living arrangements, custody issues and separating joint finances. However, in the midst of the chaos of the divorce people can overlook situations that ultimately have a negative effect on their credit standing. 

Let me start with the good news.  Divorce itself doesn’t automatically trash your credit scores.

Here are things you should be aware of so you can set yourself up for the best possible outcome:

Joint Credit Card Accounts:  Since these accounts are held by you and your spouse together, both of you are equally responsible for the debt, no matter how it is distributed in the divorce. Creditors will not honor a divorce decree so you both are still liable for that debt. This means if an account is left open, your ex can add more debt, make a late payment, miss a payment or default, and you will also be held responsible.

I recommend you close all joint credit cards and remove your ex as an authorized user from any credit cards which are open in your name only.

Mortgage Debt:  If you have a joint mortgage, and he/she is keeping the home and ultimately relieving you of any future personal financial obligations on the loan there are 3 ways to remove you from the loan:

  1. Co-owner refinances.
  2. You both agree to sell the property and pay off or settle mortgage debt.
  3. Quit claim house to co-owner and file bankruptcy.

Keep in mind that a quitclaim deed has no effect on the mortgage, so even if you are removed from the deed, all parties on the mortgage are still responsible for payments.  To avoid any future issues, hold off on signing the deed over until they have refinanced, and you are no longer on the loan. Also, talk with you lawyer about adding a stipulation to your divorce decree that ensures your ex is obligated to refinance within an agreed upon timeframe.

Auto Loan Debt: The best way to avoid sharing a car loan with an ex-spouse is to either sell the car or remove your or their name from the loan. Auto refinancing is a great way to remove someone from a car loan.  Be sure to retitle the car after the loan has been refinanced.

If you have any questions call us at 800- 822-7120.

Until next time,

THD Credit Consulting

Your Credit Score and Auto Loan Interest Rates

Auto loans are no exception to the rule that having a higher credit score makes borrowing less expensive.  In fact, an average borrower with a credit score below 500 will typically pay 10% more to borrow than those with the highest scores.

 

Auto loan interest rates, or APR, can vary on the term length of the loan, age of the car being financed and other considerations however the biggest factor is your credit score.  Before you start shopping for a car, you’ll want to check your credit score. If your credit score is low than waiting to buy while you work on improving your credit could save you a lot of money.

 

For example, here are the average interest rates for each credit score for the same (new car) $15,000, 48-month auto loan:
 

 

Credit Score Category
Average Loan APR
Monthly Payment 
Deep Subprime (300 to 500) 
14.25%
$412
Subprime (501 to 600)
11.51%
$391
Non-prime (601 to 660)
7.55%
$363
Prime (661 to 780)
4.75%
$344
Super Prime (781 to 850)
3.82%
$337
 

 

A person with a credit score above 781 would pay $337 per month while someone with a score between 300-500 would pay $412.

 

When shopping around for a car you also want to be shopping for a car loan. Get pre-approvals from several lenders and compare them to find the best offer for you.

 

 
If you currently have a low score and have time to delay your car purchase, work on improving your credit.  Which means:

 

  • Paying every bill on time, every time
  • Keeping credit card balances low relative to credit limits
  • Avoid applying for other credit within 6 months of applying for a car loan
  • Keeping old credit cards open unless there’s a compelling reason to close them
If you have any questions, reply to this email as we are here to help!

 

-Erik Kaplan

We hope you are safe and well.

The coronavirus pandemic is continuing to devastate Americans in many ways, including financially. 

Losing a job or reduced hours can cause serious stress. However, applying for unemployment doesn’t mean your credit score will automatically drop unless you aren’t able to pay your bills. 

Even if COVID-19 related unemployment does not affect you, now is still a good time to consistently check your credit report. 

With increased purchase volume moving into online sales channels because of store closures, you share more personal information online and become more exposed to the possibility of fraud.  With scammers looking for new victims during the crisis accessing your credit report is imperative.

The three credit bureaus – Equifax, Experian, and TransUnion are offering free weekly online reports through April 2021. Reviewing and understanding your credit report is a key part of being financially responsible. Credit reports show, in detail, all credit usage and payment activity related to an individual. If you see any fraudulent accounts or incorrect info this needs to be addressed immediately. 

If you need help filing a dispute, protecting your accounts or have any questions at all, THD Credit is here to help! Just email erik@thdcreditconsulting.com or call us at 800- 822-7120.

We know that staying safe, healthy and keeping your spirits high during this time can be a challenge and we hope we can bring a little comfort and peace of mind to you during this time. 

If you or someone you know is in need of Protective Face Masks to keep yourself and others safe during this time, THD has secured a friends and family discount at www.sasomei.com

Enter code: THDCREDIT at checkout to receive 10% off your order.  

Orders ship out of Los Angeles within 1 business day. For additional information contact my long time friend jackie@sasomei.com directly. 

We are all in this together and we will get through this together.

-Erik Kaplan

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