Credit Card Accounts

Issues involving credit cards can be quite frustrating during a divorce; even if it is determined that an ex-spouse is responsible for credit card bills on an account that used to be joint, the creditors can pursue either spouse if payments are not made on time and this will appear on both credit reports.  Consequently, those considering divorce or going through a divorce should examine credit consequences closely.

There are two types of accounts: individual and joint.  Here we provide some explanation and a brief look at the pluses and minuses of both. 

-Individual Account: Income, assets, and credit history are all considered by the creditor. Regardless of marital status, you alone are responsible for paying off the debts. The account appears on your credit report and the credit reports of any "authorized" users. However, if you live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin), both you and your spouse may be responsible for debts incurred during the period of marriage, and the individual debts of one spouse may appear on the credit report of the other.

-Advantages/Disadvantages: If you are not employed outside the home, work part-time, or have a low-paying job, it will probably be hard to present a strong financial picture without the income of your spouse. However, if you open an account in your own name and are a responsible person, no one can negatively affect your credit record.

-Joint Account: Income, assets, and credit history, along with those of your spouse, are considerations for a joint account. Regardless of who handles the bills, BOTH you and your spouse are responsible for ensuring that debts are paid. A creditor who reports the credit history of a joint account to credit bureaus must report it in both names for any accounts opened after 1977. 

-Advantages/Disadvantages: An application presenting the combined the financial resources of two people will probably prove a stronger case to a creditor who is granting a loan or credit card. However, because two people applied for the credit, each is responsible for all of the debt. It is very important to realize that this remains true, even if a divorce decree assigns separate debt obligations to each spouse. Ex-spouses who run up bills and do not pay them can hurt their ex-partner's credit histories on jointly-held accounts.

-Account "Users": After opening an individual account, you may authorize another person to use it. In the case that you name your spouse as the authorized user, a creditor who reports the credit history to a credit bureau must report it in your spouse's name as well as in yours for all accounts opened after 1977. A creditor also may report the credit history in the name of any other authorized user.

-Advantages/Disadvantages: These accounts are usually opened for convenience. They benefit people who may not qualify for credit on their own, such as students or homemakers. While these people are authorized use the account, only the individual account holder, and not the user, is contractually liable for paying the debt.