How Divorce Destroys Your Credit Score (And How to Fix It)

How Divorce Damages Your Credit

Divorce itself does not appear on your credit report. There is no line item that says “divorced” and no direct score penalty. However, the financial fallout from a separation can devastate your credit in several indirect but powerful ways.

In Canada, roughly 40 percent of marriages end in divorce, and many couples discover that their finances were more intertwined than they realized. Joint mortgages, shared credit cards, co-signed car loans, and authorized user arrangements mean that your ex-spouse’s financial behaviour continues to affect your credit long after the relationship ends.

The most common credit damage during divorce comes from:

• Missed payments on joint accounts when one spouse stops contributing to shared obligations.
• Maxed-out joint credit cards used to cover legal fees or living expenses during separation.
• Accounts sent to collections because neither party takes responsibility for a shared debt.
• Reduced household income making it harder to cover the same debts on a single salary.

Joint Accounts and Authorized Users

Joint Credit Cards

On a joint credit card, both cardholders are equally responsible for the full balance. If your ex runs up the card and stops paying, the missed payments and high utilization hit both credit reports. A divorce court order saying your spouse must pay a particular debt does not protect you. The credit card company is not bound by your divorce agreement, and they will pursue both account holders.

Authorized Users

If you were an authorized user on your spouse’s card, you can simply call the issuer and have yourself removed. The account history will eventually drop off your report. If your spouse was an authorized user on your card, remove them immediately to prevent further charges.

Joint Mortgages and Loans

A joint mortgage is one of the most complicated financial ties to sever. Even if a court awards the home to one spouse, the mortgage remains joint until it is refinanced in one name. If the spouse living in the home stops making payments, the other spouse’s credit suffers equally. In Canada, breaking a mortgage early can trigger significant penalties, so work with a mortgage broker to understand your options.

Co-Signed Debt

Co-signing means you guaranteed the debt. Whether it is a car loan, student line of credit, or personal loan, you are fully liable if the primary borrower stops paying. Contact the lender to discuss releasing the co-signer, though this usually requires the primary borrower to qualify for the debt on their own.

Steps to Separate Your Finances

Step 1: Get a Complete Picture

Pull your credit reports from Equifax and TransUnion. Use Borrowell for free weekly Equifax score monitoring so you can track changes in real time. Make a list of every account that has both your names on it.

Step 2: Close or Convert Joint Credit Cards

Contact each credit card issuer and request that joint accounts be closed or converted to individual accounts. Pay down the balance before closing if possible, because closing a card with a high balance hurts your utilization ratio. If your spouse will not cooperate, you can still call the issuer and request a freeze on new charges.

Step 3: Address the Mortgage

If one spouse is keeping the home, the mortgage must be refinanced into that person’s name alone. If neither spouse can qualify for the mortgage individually, selling the property may be the only option that protects both credit scores. Speak with a mortgage broker who understands separation situations.

Step 4: Redirect Bills and Update Contact Information

Make sure all bills that are now your individual responsibility are directed to your current address and email. A missed payment because a bill went to your old shared address is still a missed payment on your credit report.

Step 5: Build a New Budget

Divorce typically means going from a dual-income household to a single-income one while costs like housing do not drop proportionally. Create a realistic budget based on your new income. Prioritize making minimum payments on all debts to protect your credit while you sort out the bigger financial picture.

Rebuilding Your Credit Independently

Establish Credit in Your Own Name

If most of your credit history was tied to joint accounts, you may have a thin credit file as an individual. Open a secured credit card like the Capital One Secured Mastercard to start building an independent credit history. Use it for a small recurring expense and pay the full balance each month.

Use Tools That Build Credit Passively

A prepaid card with budgeting features like KOHO can help you manage your spending carefully during this transition. While prepaid cards do not report to credit bureaus directly, KOHO offers credit-building features that can supplement your recovery strategy.

Keep Utilization Low

Credit utilization, the percentage of your available credit that you are using, accounts for about 30 percent of your score. During and after divorce, it is common for utilization to spike because joint credit limits disappear when accounts are closed. Try to keep each card below 30 percent utilization, and below 10 percent if possible.

Do Not Apply for Too Much Credit at Once

Each credit application creates a hard inquiry on your report, temporarily lowering your score by a few points. Space out applications by at least three to six months. Focus on one secured card first, then add a second credit product after six months of consistent payments.

Seek Professional Help If Needed

A non-profit credit counselling agency accredited by Credit Counselling Canada can help you create a debt management plan if you are overwhelmed. In some provinces, you may also qualify for legal aid to help with the financial aspects of your divorce settlement.

Protect Yourself Going Forward

Once your finances are separated, commit to building credit only in your own name. Monitor your credit report regularly through Borrowell to catch any issues early. If your ex-spouse fails to pay a debt that was assigned to them in the divorce, you will see it on your report and can take action quickly.

Rebuilding credit after divorce takes time, typically 12 to 24 months of consistent effort, but every step you take puts more distance between your financial past and your independent financial future.