|Mary and Bill recently divorced. Their divorce decree
stated that Bill would pay the balances on their three joint credit
card accounts. Months later, after Bill neglected to pay off these
accounts, all three creditors contacted Mary for payment. She
referred them to the divorce decree, insisting that she was not
responsible for the accounts. The creditors correctly stated that
they were not parties to the decree and that Mary was still legally
responsible for paying off the couples joint accounts. Mary
later found out that the late payments appeared on her credit
If you've recently been through a divorceor
are contemplating oneyou may want to look closely at issues
involving credit. Understanding the different kinds of credit accounts
opened during a marriage may help illuminate the potential benefitsand
There are two types of credit accounts: individual and joint. You
can permit authorized persons to use the account with either. When you
apply for creditwhether a charge card or a mortgage loanyou'll
be asked to select one type.
Individual or Joint
Individual Account: Your income, assets, and credit history
are considered by the creditor. Whether you are married or single, you
alone are responsible for paying off the debt. The account will appear
on your credit report, and may appear on the credit report of any "authorized"
user. However, if you live in a community property state (Arizona,
California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington,
or Wisconsin), you and your spouse may be responsible for debts
incurred during the marriage, and the individual debts of one spouse
may appear on the credit report of the other.
Advantages/Disadvantages: If you're not employed outside
the home, work part-time, or have a low-paying job, it may be
difficult to demonstrate a strong financial picture without your
spouse's income. But if you open an account in your name and are
responsible, no one can negatively affect your credit record.
Joint Account: Your income, financial assets, and credit
historyand your spouse'sare considerations for a joint
account. No matter who handles the household bills, you and your
spouse are responsible for seeing that debts are paid. A creditor who
reports the credit history of a joint account to credit bureaus must
report it in both names (if the account was opened after June 1,
Advantages/Disadvantages: An application combining the
financial resources of two people may present a stronger case to a
creditor who is granting a loan or credit card. But because two
people applied together for the credit, each is responsible for the
debt. This is true even if a divorce decree assigns separate debt
obligations to each spouse. Former spouses who run up bills and
don't pay them can hurt their ex-partner's credit histories on
If you open an individual account, you may authorize another
person to use it. If 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 your's (if the account was
opened after June 1, 1977). A creditor also may report the credit
history in the name of any other authorized user.
Advantages/Disadvantages: User accounts often are opened
for convenience. They benefit people who might not qualify for
credit on their own, such as students or homemakers. While these
people may use the account, younot theyare contractually
liable for paying the debt.
If You Divorce
If you're considering divorce or separation, pay special
attention to the status of your credit accounts. If you maintain joint
accounts during this time, it's important to make regular payments so
your credit record wont suffer. As long as there's an
outstanding balance on a joint account, you and your spouse are
responsible for it.
If you divorce, you may want to close joint accounts or accounts in
which your former spouse was an authorized user. Or ask the creditor
to convert these accounts to individual accounts.
By law, a creditor cannot close a joint account because of a change
in marital status, but can do so at the request of either spouse. A
creditor, however, does not have to change joint accounts to
individual accounts. The creditor can require you to reapply for
credit on an individual basis and then, based on your new application,
extend or deny you credit. In the case of a mortgage or home equity
loan, a lender is likely to require refinancing to remove a spouse
from the obligation.
For More Information
The FTC publishes a series of free consumer brochures on credit
issues. You also can request a free copy of Best
Sellers, a complete list of FTC publications, at: Consumer
Response Center, Federal
Trade Commission, Washington, D.C. 20580; (202) 326-2222.
TDD: (202) 326-2502.