Credit Score drinking badly?
There could be a fairly simple explanation. Your credit worthiness may have been achieved during marriage as a financial blend thus creating a co-dependence of balanced elements in order to be drinkable. Eliminate one of the wage earners and you are standing alone as one varietal with nothing to smooth out the tannins if you fall short in earning capacity, credit history, and other less than desirable elements. Now you are viewed as undrinkable or they ask you to pair yourself with high interest rates, increased security or deposits. This raises your cost of borrowing funds and the same goods and services end up raising your cost of living. Does it make sense that one spouse moved on increasing his or her credit drinkability while the other is running the risk of being poured out? No! Something can be done. A credit damage expert can equalize the cost of credit damage in a divorce. They are the credit winemaker that will calculate the cost to restore your drinkability. That means that the one that looses the most can be awarded damages to equalize the disparity so they can at least experience to some degree the same credit economic advantages as the other spouse. Just one more way to preserve your economic stability so you can get on with the wine life you deserve.
I interviewed Georg Finder an Independent Credit Damage Evaluator to learn more. Here is our interview:
Cheryl: Why does credit capacity or as you like to call it “credit reputation” change with divorce and is there anything that can be done to establish equality among divorcing spouses?
Georg: The divorce in and of itself will impact credit because marital status is a factor in credit scoring. It takes some doing to leave the two parties with “equal” credit capacity. This can only be accomplished if care is taken to measure the disparities arising from the way credit is scored.
Cheryl: Can you give us a few examples of how the disparities in credit scoring arise?
Georg: As a practical matter, the lower earning spouse, or the spouse controlling fewer assets, will suffer far more than the higher earning spouse since credit granting and scoring institutions place such importance on assets, debt exposure, and income streams. Some scores will remain intact to the extent that one or both spouses had already been using personal credit, or no marital credit had been established.
Cheryl: What will the impact of the divorce most likely do to the lower earning spouse?
Georg: The lower earning spouse will most likely experience a drop in credit scores based on the loss of his or her biggest asset—the income from the higher earning spouse. Hence, this becomes a problem for divorce practitioners: Divorce usually means dramatically unequal outcomes upon the credit scores of the parties.
Cheryl: What impact, if any, will the impact of divorce have on the higher earning spouse?
Georg: Often times the higher earning spouse seeks to reduce liabilities and in doing so reaps the benefit in most cases of an increased credit capacity and score.
Cheryl: Fast forward after divorce, it appears that the lower earning spouse will most likely see a loss in credit privileges and this concerns me as it may make financial recovery even more difficult.
Georg: You are correct. Divorce and the loss of authorized user privileges on joint credit accounts may leave the lower earning spouse without a credit identity. If there is any credit intact, the loss of income could result in increased interest rates on loans, higher monthly installments and security or deposit requirements while the higher earning spouse enjoys just the opposite.
Cheryl: Is there an obligation on Divorce Practitioners to equalize credit capacity when separating assets?
Georg: Statutes have not spelled out how to divide “credit capacity” although credit capacity is clearly recognized as an “asset.”
Cheryl: What can be done about the inequality?
Georg: A support award is available for the lower earning spouse that is viewed as the “dependent spouse.” The court must consider certain factors which include standard of living as well as earning capacity, marketability, and portability of skills, education, contributions to the others’ education, ability to pay support, availability of unearned income streams, and the needs of the supported spouse. Almost all of the mandatory statutory support factors are reflected and evidenced in credit reports.
Cheryl: How do you calculate the discrepant creditworthiness between the divorcing spouses?
Georg: The mathematical differences between what the same creditor would charge each spouse for the same goods. For example, compare the different costs of borrowing money. It could be a comparison of the different costs of borrowing money to purchase a car on credit. Interest rate, down payment, servicing points, and monthly repayment over seven years is compared. The difference between the value of the two credit profiles is the amount that is equalized.
Cheryl: Wow, it seems to me that equalizing the credit capacity could be often overlooked. What is the first thing a divorcing spouse should do to preserve their credit?
Georg: Obtain copies of your credit reports in the early stages of divorce as soon as possible. The three primary credit reporting agencies are Experian, TransUnion and Equifax Information Service. There is also a Tri-Merged Subscribers consumer credit report. This report is typically the most complete. If going to court, the valuation date for purposes of the division is “as near as practicable to the time of trial.” This is something to be aware of. A careful monitoring of activity on credit reports would also signal potential unauthorized uses of marital credit during divorce. Credit reports are also used to evaluate changes in credit as time moves out.
Cheryl: In my mind, credit equalization should be a top priority when it comes to the division of assets in a divorce.
Georg: In my view, credit is a form of reputation, and may be the most valuable asset a person has. The asset is intangible property and should be treated as other intangible assets accrued during marriage requiring division in divorce.
Cheryl; Thank you Georg, this has been very insightful. Where can you be reached if someone wanted to reach out to a professional Credit Evaluator?
Georg: My pleasure. My website is www.creditdamageexpert.com which provides my qualifications and services. I can also be reached at Georg@creditdamageexpert.com.