Equifax Data Breach & Divorce: Double Trouble?

Does Equifax's recent disclosure of a data breach affecting nearly half of adult Americans have you doubly worried because you're going through a divorce? You're not alone. You may have heard that divorce impacts credit. While this is a common belief, it's not true in all cases. Divorce can impact your credit, in good ways and bad, so here are a few tips to understand these credit risks, mitigate credit minefields, and manage credit exposure when you've been doubly exposed by divorce and the Equifax breach. And, we'll tell you how to use the breach to protect yourself from divorce-related credit woes.

First, the good news: marital status does not show on credit reports. Your creditors and employers will not be able to tell whether you are divorced or have a pending divorce. Credit scores are not directly impacted by marital status, so there's no automatic drop upon a divorce filing. Lenders cannot discriminate against a person based upon his or her marital status. The breach alone will not leak information about your past or pending divorce.

Unfortunately, there is more bad news than good.

The Equifax breach may have placed your sensitive personal information into the hands of an unfriendly hacker. But that's not the only person who knows everything required to impersonate you and apply for credit in your name - so does your spouse! Often married couples know each other's dates of birth, social security numbers, financial institutions, and residence history, but if they don't, divorce puts most of this information into your ex's hands.  The financial disclosure process mandates an exchange of detailed personal financial information. No matter how friendly your divorce, this creates credit exposure for you now and in the future, as your ex has now has the tools to wreak financial havoc on a whim.

Don't think your former spouse would use sensitive information to take advantage of you? Good. But you're not out of the woods. The more common credit problem in divorce is the inability to separate joint debts. When married people secure a joint auto loan, credit card, or mortgage, they've made a contract with the lender independent of their marital status. Meaning, the divorce does not dissolve either spouse's obligation of repayment, nor does divorce remove joint debts from ongoing credit reporting. For example, when your former spouse takes the marital home, the repayment of the mortgage will continue to show up on, and impact, your credit report. On time payments will help your credit score (silver lining!), while late payments, short sale, and foreclosure will hurt it significantly.

Upon your future application for credit, lenders will generally exclude from your debt/income ratio any payments that were allocated to your spouse by court order. So, as long as your spouse is paying on time, your ability to secure credit should not be impeded. Still not out of the woods, though: your former spouse's illness, incapacitation, or death could cause signficant credit damage, and even subject you to a personal obligation to repay the creditor, even though you were absolved of the debt by court order.

There are two ways in which you can protect your credit after divorce. This is where the Equifax breach is actually going to help you.

First, ensure that your divorce process is conducted by knowledgeable attorneys or attorney-mediators who will property draft court orders to: (a) specifically allocate debts between spouses; (b) impose deadlines for repayment or refinance of joint debts; and (c) outline specific remedies for credit damage caused by poor payment histories.

Second, whether or not you were impacted by the breach, take advantage of Equifax's offer to provide free credit monitoring. You'll find information on their website. Monitoring your credit is the best, fastest and most accurate way to detect whether your former spouse (or anyone else!) is taking any purposeful action to damage your credit, or subjecting your credit score to decline due to poor repayment of joint debts. Your credit score is not adversely affected by your own credit monitoring, and, thanks to Equifax, now it is free.

Erika Englund is a family law attorney-mediator-strategist, amateur disruptor, and believer in positive, productive, affordable & efficient divorce. She's a legaltech evangelist, because she hates justice gaps, a former law school professor, a professional speaker and continuing education provider, and a happy co-parent (usually; she's not perfect) of two young children in Northern California. She wants you to know that this isn't legal advice.