24-May-2016 written by : FSI-Team
When Ms. Renu Kumar, went through the proceedings of divorce to exit her troubled marriage, there was a lot going through her mind. At that time her credit score was the least of her worries. Should she be worried at this time about her score? Should she cling on to a failing relationship because of the impact it may have on her score? Read on to find out.
They say “marriage is blissful”. How miserable must it be when the relationship turns sour and the “once in love” are now constantly at loggerheads? It does leave a bitter taste in your mouth and you feel emotionally drained at the end of it. At such a destabilising time of your life, you really don’t want to be bothered with an extra strain of CIBIL scores. Do you? We do have good news and bad.
Just like the occidentals, we have seen a rise in divorce cases in India in the past decade. What’s best for both parties is to amicably sort the financial responsibilities. When it comes to dividing financial obligations, husband and wife must come together and mutually agree on a financial separation. This is in the interest of both the parties and their credit scores.
If you have been through your own credit report even once, you might have noticed that it does not record your marital status. The reason for this is simple; your marital status does not dictate your creditworthiness. CIBIL score calculation only considers your attitude towards handling your finances. So, whether you are married, separated or annulled, single or committed, it has no direct bearing on your score. Unless, you co-signed with your partner any debt agreements or you stand as a guarantor to any of their loans, there is a zero chance that your divorce will impact your CIBIL score.
So your marriage has hit a rough patch and you would like to part ways. Have a mutual settlement or take charge of debt repayments as per the divorce decree. A divorce decree is a document which lists how the responsibilities are divided among the two individuals. Although the decree does specify responsibilities but it does not break the contracts with the lenders. So, if one spouse turns spiteful and does not make timely repayments on joint debt accounts, it will impact the credit score of both individuals. This can cause worry, especially if you are looking to apply for credit in future.
It is important to note, that if your spouse has not paid the dues, raising a CIBIL dispute will not help in any way.
What our client said: Primary card holder has to bear expenses made by the spouse on the add-on credit card, even after the divorce.
What we advise: The day you file for a divorce you must start disassociating yourself financially from your partner. It is in the interest of your own future credit health. When a partner, enraged with spite, gets a chance to hurt you financially they can do a lot of damage. A credit card is a common example where spouses share credit. Either of them is responsible for making the payments on the card. But after the marriage ends, your spouse may not be willing to pay or is not able to pay the dues to financial constraints. This affects credit scores of both the parties as non-repayment is recorded in both their credit reports respectively. However, if you have closed add-on cards or surrendered primary cards, then there is no probability of a damage being done.
If this card was an old card, it will upset your CIBIL score to close it down. Shutting down credit accounts also hurts your available credit limit. You can apply for credit card once again and have the freedom to use it responsibly than having to pay for dues that your ex-partner made.
What our client said: One partner keeps the car even though it was bought through a jointly held loan account.
What our client said: A co-applicant has an equal responsibility of sharing the liability of the debt. However, when days are all rosy people don’t think about such things. Post the split, partner who does not own the car should without further delay have his/ her name removed from the loan contract and thereby make sure that the responsibility lies entirely on the car owner, unless otherwise decreed.
What our client said: A home loan was taken by Mr. & Mrs. Ahluwalia. When things didn’t work out, the home loan remained the only link between the two. Neither of them were willing to pay for the EMIs. What to do?
What we advise: Sell the property, if possible. Use the proceeds to pay off the debt first. If this is not an option then one party must step forward to take up the responsibility of the repayment. The other person must immediately seek to remove his/ her name from the loan contract. This may not be easy as joint accounts are more readily available than individual accounts as there is a shared liability.
What our client said: When all was hunky dory, Ms. Das stood as guarantor for Mr. Das’s personal loan. Now, after the divorce it was her greatest worry on what can be done.
What we advise: Unfortunately, in life some things cannot be undone. Ms. Das’s only options were to either find another guarantor for that loan or make sure that payments were done on time. A guarantor promises to step in to repay the debt in case of default, so lenders don’t let them go easily even though divorce may be a reason.
It takes a lot of effort, time and patience to build your score over a period of time. Unfortunately, it does not take as much time for it to nosedive. Observe maturity and don’t be reckless when it comes to taking decisions that could impact your score. Stress on a total financial separation as even the most sober partners may turn vindictive if they do not take the end of the marriage well. If you are responsible to make repayments on any loans then, make sure you do not default as it will affect your credit score too. You can either supplement your income or reduce your expenses but you must stay in line with your credit contracts.