Fair Credit Reporting Act News
Knowing how mistakes in reporting following a divorce could harm the credit records and financial situation of both individuals
Thursday, October 10, 2024 - Divorce can be an emotionally and financially complicated process, and one area sometimes disregarded during this period is how credit reporting mistakes could happen and impact both sides. Joint financial accounts have to be split, closed, or reassociated after a divorce. Unfortunately, mistakes in reporting these developments may have long-term effects on people's credit scores and financial stability. Credit report errors can be corrected given the provisions of the Fair Credit Reporting Act (FCRA).
Common reporting mistakes following divorce center on joint accounts. Should the credit bureaus be improperly informed even after a divorce is finalized, they could still show both parties as being financially responsible for shared accounts. For instance, even if they no longer have access to the account, the missed payment could show up on the credit record of the other spouse if one partner is in charge of making payments on a credit card that remains in both names but neglects to do so. This might cause credit scores to decline and trouble getting loans or fresh credit. Another common problem results from accounts meant to be terminated or transferred following a divorce nevertheless being open in error. Sometimes banks and credit card firms neglect to update their records or follow the guidelines for closing or transferring accounts, therefore tying people to the same credit responsibilities. In such situations, even if only one of the ex-spouses is in charge of debt management, any bad behavior on these accounts--such as late payments or excessive balances--may harm the credit scores of both ex-spouses. Sometimes one partner removes themself as an approved user from the other's account, although credit bureaus still show the removed spouse as connected to the account. Financial hardship can result from this kind of reporting mistake since the spouse removed from the account could still be liable for financial decisions taken by the other.
Likewise, joint mortgage and auto loans taken out during a marriage may be misstated following divorce. Confusion and problems might arise if the divorce order assigns one party accountability for a shared loan but the lender still notes joint responsibility. Any late payments made by the responsible partner will show up on both credit reports, therefore compromising both credit ratings even if one member is no longer financially engaged. Financial and legal professionals advise divorcing couples to make sure all joint accounts are either closed or transferred under one person's name as part of their divorce settlement to help avoid these issues. After the divorce is over, both sides should also closely review their credit records for any mistakes, routinely verifying that accounts have been updated accurately and that no illegal behavior shows on their credit profile.
Should reporting issues be found, customers should quickly submit disputes with the credit bureaus and coordinate with pertinent financial institutions to fix the mistakes. Furthermore, when challenging credit reporting mistakes, a divorce judgment that precisely specifies account ownership and financial obligations can be quite helpful. Reporting mistakes following divorce is a major yet sometimes disregarded issue overall. If these mistakes go untreated, they can cause long-term financial damage. This emphasizes the significance of both sides being alert and acting early to maintain their credit standing after divorce.