My New Blog

For immediate release March 14, 2011

Protecting Your Credit During Divorce

By James Ricks, Mortgage Consultant
The Lending Offices of James Ricks

When a marriage ends in divorce, the lives of those involved are changed forever. During this time of upheaval, one thing that shouldn’t have to change is the credit status you’ve worked so hard to achieve.

Unfortunately, for many, the experience is the exact opposite. Unfulfilled promises to pay bills, the maxing out of credit cards, and a total breakdown in communication frequently lead to the annihilation of at least one spouse’s credit. Depending upon how finances are structured, it can sometimes have a negative impact on both parties.

The good news is it doesn’t have to be this way. By taking a proactive approach and creating a specific plan to maintain one’s credit status, anyone can ensure that “starting over” doesn’t have to mean rebuilding credit.

The first step for anyone going through a divorce is to obtain copies of your credit report from the 3 major agencies: Equifax, Experian®, and TransUnion®. It’s impossible to formulate a plan without having a complete understanding of the situation. (Once a year, you may obtain a free credit report by visiting www.AnnualCreditReport.com.)

Once you’ve gathered the facts, you can begin to address what’s most important. Create a spreadsheet, and list all of the accounts that are currently open. For each entry, fill in columns with the following information: creditor name, contact number, the account number, type of account (e.g. credit card, car loan, etc.), account status (e.g. current, past due), account balance, minimum monthly payment amount, and who is vested in the account (joint/individual/authorized signer).

Now that you have this information at your fingertips, it’s time to make a plan.

There are two types of credit accounts, and each is handled differently during a divorce. The first type is a secured account, meaning it’s attached to an asset. The most common secured
accounts are car loans and home mortgages. The second type is an unsecured account. These accounts are typically credit cards and charge cards, and they have no assets attached.

When it comes to a secured account, your best option is to sell the asset. This way the loan is paid off and your name is no longer attached. The next best option is to refinance the loan. In other words, one spouse buys out the other. This only works, however, if the purchasing spouse can qualify for a loan by themselves and can assume payments on their own. Your last option is to keep your name on the loan. This is the most risky option because if you’re not the one making the payment, your credit is truly vulnerable. If you decide to keep your name on the loan, make sure your name is also kept on the title. The worst case scenario is being stuck paying for something that you do not legally own.

In the case of a mortgage, enlisting the aid of a qualified mortgage professional is extremely important. This individual will review your existing home loan along with the equity you’ve built up and help you to determine the best course of action.

When it comes to unsecured accounts, you will need to act quickly. It’s important to know which spouse (if not both) is vested. If you are merely a signer on the account, have your name removed immediately. If you are the vested party and your spouse is a signer, have their name removed. Any joint accounts (both parties vested) that do not carry a balance should be closed immediately.

If there are jointly vested accounts which carry a balance, your best option is to have them frozen. This will ensure that no future charges can be made to the accounts. When an account is frozen, however, it is frozen for both parties. If you do not have any credit cards in your name, it is recommended you obtain one before freezing all of your jointly vested accounts. By having a card in your own name, you now have the option of transferring any joint balances into your account, guaranteeing they’ll get paid.

Ensuring payment on a debt which carries your name is paramount when it comes to preserving credit. Keep in mind that one 30-day late payment can drop your credit score as much as 75 points. It is also important to know that a divorce decree does not override any agreement you have with a creditor. So, regardless of which spouse is ordered to pay by the judge, not doing so will affect the credit score of both parties. The message here is to not only eliminate all joint accounts, but to do it quickly.

Divorce is difficult for everyone involved. By taking these steps, you can ensure that your credit remains intact.

Well it is officially Fall!  Hopefully the cooler weather will arrive and we will all stay away from the flu bug.

I had an exciting summer.  First, me and my son Hunter went on an African Safari in South Africa.  What a trip we had!  This was a passage into manhood trip for my 13 year old.  We spent a week traveling and doing something we really enjoy.

Next I went and spent a weekend with my wonderful bride Pam.  We went to Fredricksburg, TX for a relaxing weekend and a wine tour.  We found some great vino in the Texas Hill Country.

Pam and I also skydived for the first time.  Can you believe that we actually jumped out of a perfectly good plane?  This was so much fun and I encourage you to do this and mark if off from your bucket list.  We jumped at 14,000 feet.  Then we were able to freefall at 120 mph for 5000 feet.  The real enjoyment came as we did a canopy ride down to the ground.  Pam is the one that deserves an "attaboy".  She is absolutely frightened of heights.  However, she overcame and made a great jump.

My daughter Tori continues to sing and dance.  She was very active in Christian Youth Theater.  They performed several plays over the summer.

A special thanks to all of my clients and referral sources!!!  We had a great crawfish boil for all of you.  If you did not make it this year, make sure that you attend next year.  It is a pleasure to work with such wonderful people.  I am truly blessed to have the privilege of helping people to achieve their dreams.  We had to change our residential lending name to Bluewater Mortgage so we can process FHA loans.  Yep, I was thinking of some offshore fishing when I named the company.

It has already been the best year since I started lending in 1997.  God has richly blessed me and I thank him for the success.

Hope all of you are doing great!  Just remember a positive attitude will carry you far in life.  Those who remain in stinkin thinkin will never achieve their goals in life.  Believe and you will receive.

James Ricks

Nov 2008

It has been a fun year!  My family has been very busy.  My oldest son, Hunter is about to race for the national championship in BMX.  He recently won the 12 yr old boys state championship.  This is his first year in public schools.  We have home schooled him and my daughter prior to that.  Hunter also played 7th grade football this past season for Tomballs A team.  He also made all A's on his first report card. 

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Tori is my little princess.  She is active in the 5th grade at school.  She has received the title class president.  I am very proud of her leadership skills at school.  Tori is very active in Christian Youth Theater.  She loves to sing and dance.  She will soon be trying out for the production of "Narnia".

Gunnar is my youngest son.  We just celebrated his 2nd bday.  He is a handfull.  Full of energy and smiles.  He is teaching himself to potty.  Yes, teaching himself.  He can not stand to have a dirty diaper.  He loves to give kisses and hugs to all of us.  He also feels that every stranger needs to stop and talk to him.  Never a boring minute with this guy!!

My wife Pam is like most moms.  On the go- ON the go!!!   She is busy transporting kiddos to all of their events, doing laundry, cleaning etc.....

She is also active in the ladies ministry at Magnolia Bible Church.  She will be in charge of the next ladies retreat.  She has a real servants heart.  Also her special chocolate chip cookies are awesome. 

I am in my fall ritual.  It is hunting season and I am in the woods as much as allowed.  I recently completed two father/child ministry hunts at a ranch in Kerrville.  It is so cool to see dads bond with their children in God's great outdoors.  Pam and I also had our first safari adventure to South Africa.  What a blast other than the 22 hour plane ride.

 The Lending business has been challenging.  However, we have had our best year ever.  Thanks to all of my referral partners!  However, the market has been brutal.  Lending policies are changing every day. 

The good news is that our local market is in much better shape than in other areas.  God is good and we continue to do loans and have fun!