Why Your Credit Score May Drop Following Divorce

One of the ugly sides of divorce is that it can ruin the creditworthiness of both parties. Not directly though, but because of splitting assets, including bank accounts, your individual credit reports can get a hit.

That said, it is worth noting that a credit report does not capture your marital status; so, a change of the status has zero effect on your credit rating. What you must worry about is your shared financial obligations in the ways outlined below.

1.  Unequal Split of Debt

At the end of divorce proceedings, a decree is issued by the court ordering how both assets and debt are to be split. The order also specifies who is to assume which debt- no matter who applied for the debt in the first place.

Now, let’s say that you get to keep the house and the other person pays the mortgage, if they refuse the obligation, your credit report suffers.

2.  Change of Budget

Typically, when married, your household enjoys two incomes. Once the divorce is final, you’re saddled with a new budget that your individual income might not support.

You may now have to solely clear the remaining balance on your car, a debt that was previously guaranteed by two incomes. The reality is that if you default, your credit score will surely drop.

3.  Sabotage by Your Partner

Sabotage is a real risk when it comes to messy divorces. This is usually the case when both parties have access to the same accounts. To illustrate, if your partner was an authorized user on your credit card, they can choose to max out the card with total disregard for the resulting negative effect on both your credit reports.

4.  Drop of Your Credit Limit

Legally, creditors have the sole discretion of deciding which terms to offer clients during credit application. Further, they can change the terms upon review of the customer’s credit report. So, if your partner was earning more money that led to you getting a high credit limit, separating the accounts changes your creditworthiness.

Subsequently, creditors can decide to lower your allowable limits to reflect your current financial status. With a lower limit, you may have to overutilize or max out your credit line, effectively lowering your credit scores.

How to Protect Your Credit After Divorce

However amicable the divorce proceedings are, it is upon you to keep your credit score high. Keep in mind that payment history and amount owed are the biggest determinants of your credit score, at 35% and 30% respectively.

Downsize your Budget

The change from two incomes to one income can diminish your ability to pay utilities and existing debts. To survive, you need to rebuild life starting by living by your means. Even with alimony going your way, the money may not cover new budget items. This usually affects women more than men due to disproportionate income that see men earning 82.3% more.

Deal with Shared Debt

As earlier noted, creditors are not obligated to honor divorce decrees. Moreover, removing a name from the loan’s contract is nearly impossible. The only option left is to convince your partner to diligently pay the balances to avoid delinquency on your credit report.

Another approach is to sell off properties or assets that are attracting monthly repayments. Ensure that the proceeds go to clearing the debts before sharing the remaining money. Lastly, the person responsible for the debt can refinance the loan in their name which automatically makes them the only debtor.


Your credit score can drop after a divorce due to many factors including the failure by either party to make repayments on shared debts. To mitigate, you need to disentangle your finances and ensure that only the one responsible for the debt, as per the decree, is the solely listed debtor. Further, open new lines of credit, such as a secured credit card under your name to help rebuild your credit.

Source: creditabsolute.com

GreenSky Loans Review 2022

It’s always worth shopping around to see what rates you can get from other lenders. While most personal loans are specifically for home improvement projects, you can simply apply the loan to your project. Many online lenders also allow you to pre-qualify so that you can check their rates ahead of time without affecting your credit score, making it easy to compare different offerings.
Just remember that both types of loans have a origination fee that is charged with your first monthly payment.
It is a different way to get a home improvement loan than you may be used to. This article will explain the differences, plus pros and cons, to let you know if this lender is right for you.

What Is GreenSky Loans?

Even though GreenSky has this offer for those with bad credit, the better your score the better your offer from GreenSky.  If you’re looking to improve your score, check out these ways to improve your score this year.
Minimum credit score
If you’re looking at a smaller project, a credit card might cover your home improvement expenses. Many cards offer 0% interest during a promotional period much like GreenSky, but unlike GreenSky, you’re not penalized with retroactive interest if you don’t pay off your loan from the promotional period. Make sure to read the fine print if you go this route because many credit cards have high APRs after the promotional period.
Is GreenSky Trustworthy?

How to Apply for a GreenSky Home Improvement Loan

GreenSky offers a Reduced Rate Loan with competitive rates and long repayment periods. A GreenSky Reduced Rate Loan is a good loan option if you know you’ll need longer than a few months to pay off your loan.
Goldman Sachs acquired GreenSky, LLC in 2021. While Goldman Sachs owns GreenSky, the actual financing of GreenSky’s loans goes through many different federally insured banks throughout the country.
With competitive rates and long repayment periods, a GreenSky Reduced Rate Loan might be a good option if you know you can’t pay off your loan quickly.  
Loan amounts

How Does a GreenSky Loan Work?

If you’re not working with a GreenSky Pro or simply want to look at other options to cover your home improvement costs, check out some alternatives below or read our best ways to finance your home improvements.
account activation fee
Interest rate ranges

Types of GreenSky Loans

One small downside we’ve found with GreenSky is because everything is run through the contractor, GreenSky’s website is not marketed for the average consumer. All the information is directed at contractors, making some consumer information difficult to find. Luckly, we dove into the fine print and FAQs and found the most important information you need before you sign up for a GreenSky Loan.
Ready to stop worrying about money?

GreenSky Deferred-Interest Loans

CFPB believes that GreenSky was at least aware of the problem and did not take the proper actions against it. CFPB is requiring GreenSky to refund or cancel 9 million in loans, pay a .5 million civil penalty, and create new procedures to avoid it happening in the future.

More Information About GeenSky Reduced-Rate Loans
Get the Penny Hoarder Daily

  • Deferred interest
  • Higher interest than other options

Get the Penny Hoarder Daily

  • Up to 12-year repayment period
  • APR 0% to 11.99%

Best for Longer Repayment Periods

None disclosed
Key Features
GreenSky Loans itself is not a lender, but instead works as a go-between connecting you, the homeowner, and federally insured banks to find the best financing option for your project.
We’d love more information on the GreenSky website itself, but these rates are competitive and we like that the GreenSky Pro should walk you through all your options including the specifics on your monthly payment before you officially sign for the loan. 
Even if you are initially denied, GreenSky will automatically send you an alternate offer called an Instant Counteroffer (ICO). This is a nice feature for those with less than perfect credit as it doesn’t require another hard credit pull that might hurt your credit score.