Texas residents contemplating divorce may be interested in how dealing with the marital home may adversely affect his or her credit rating afterward. Steps to avoid credit problems associated with lingering joint ownership of the property or other problems are best taken in advance. Buyouts and refinancing strategies may be used to prevent this and assure a smooth transition.
After a divorce, individuals may find it wise to check their credit scores and reports before applying for a mortgage. While it is common for one spouse to retain the family home and make arrangements to buy out the other spouse, before the divorce becomes final both parties may still be listed as joint owners. Those contemplating divorce may wish to initiate the transfer or buy out the other’s share before the divorce becomes finalized to avoid problems later when trying to obtain a new mortgage. In addition, in the event one of the spouses purchases a property before the divorce becomes finalized, it may be advisable to request that the other spouse sign a quit claim on the new property.
Even when a divorce has been finalized and one spouse was legally awarded the property, if the property carries a mortgage, both names may still be legally tied to it. If the ex-spouse retaining the property is unable to refinance the mortgage or make the monthly payments in a timely manner, the former spouse’s credit rating may be adversely impacted.
In Texas, as a community property state, all assets and debts are considered the property of both spouses, except for a few exceptions such as gifts and inheritances. An individual contemplating divorce may wish to consult with an attorney on issues of community property division to work out an arrangement that will avoid credit problems afterward.
Source: Credit.com, “How to Divide Your House in a Divorce“, October 31, 2014