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Separating your finances after a divorce can be complicated. If you have a joint mortgage, you generally can't remove it from your credit report when the divorce is final, even if the divorce decree assigns the debt to your ex-spouse. You remain financially responsible to the lender, and the lender will continue to report payment activity to the credit bureaus as long as your name is listed on the loan contract—for better and for worse.
If you're worried about how the loan will affect your credit, you and your ex-spouse must take action to get your name off the mortgage before it will be removed from your credit reports.
Does a Divorce Decree Remove a Mortgage From Your Credit Reports?
A divorce decree can assign financial responsibility for your mortgage, but it doesn't remove the account from your credit reports. It's a court order that outlines each spouse's post-divorce rights and responsibilities, including division of assets and debt, but it has no impact on your financial obligations to your creditors.
If you have a joint mortgage, you and your spouse remain liable for the debt under the loan contract you signed when you took out the mortgage.
The mortgage lender or servicer will continue reporting payment activity for the account to the three major consumer credit bureaus—Experian, TransUnion and Equifax—in your name. That means your ex making regular, on-time mortgage payments will show up on your credit reports.
On the other hand, if the court assigns the debt to your spouse in the divorce decree and they don't pay, it hurts your credit too.
Because disentangling your finances after a divorce can be complex, it's a good idea to consult your attorney or financial advisor for guidance to understand how your decisions may affect your credit and financial health moving forward.
What Can You Do to Remove a Mortgage From Your Credit Reports After a Divorce?
There are only a few ways to remove a mortgage from your credit report if your name is listed on the loan contract and the account is being reported correctly.
| Refinance the Loan | Sell the House | Pay Off the Loan | |
|---|---|---|---|
| What it does | Replaces your existing loan with a new mortgage | Uses the proceeds from the sale to pay off the mortgage balance | Uses cash reserves to pay off the loan balance |
| Benefits |
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| Drawbacks |
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| Difficulty | Varies based on creditworthiness | Varies based on the market conditions | Varies based on remaining loan balance |
| Best for | Those with good credit and a stable income |
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Refinance the Loan
Refinancing replaces the existing mortgage with a new one that has a new interest rate and loan term and is only in your ex-spouse's name. But they must meet the lender's income and credit requirements to qualify on their own, and they may need to pay closing costs again.
When the refinance is complete, the original mortgage account will be closed, but it will stay on your credit reports for up to 10 years. Since the refinanced loan is only in your ex-spouse's name, it won't appear on your credit reports or affect your credit history.
Refinancing can be a good option if rates have remained relatively stable or dropped since you got the original loan and one spouse wants to remain in the home, especially if children are involved. But if rates have increased, it could make the monthly payments significantly more expensive.
Refinancing also restarts the clock on the loan term, so the payoff date could be later than the original loan, depending on the term your ex-spouse chooses.
Tip: Refinancing a mortgage generally takes 30 to 45 days. To avoid delinquencies on your credit reports, continue making payments on the original mortgage until the refinance is complete.
Sell the House
Selling allows both spouses to start over with a clean financial slate. When the sale is complete, you use the proceeds to pay off the loan balance and split any remaining profits with your ex-spouse based on the division of assets outlined in the divorce decree. The mortgage account stays on your credit report listed as closed but no further payment activity is reported.
Selling can be a good option if neither spouse plans to stay in the home or can afford to cover the mortgage on their own. But selling may not be your best bet if you owe more than the home is worth or can't pay for the costs associated with selling, such as real estate commissions, closing costs and taxes.
Tip: Finding a buyer may take time. If you opt to sell, be prepared to work with your ex-spouse throughout the process, and continue making your mortgage payments so late payments don't appear on your credit reports.
Pay Off the Loan
If you or your ex-spouse has substantial cash reserves, you could use the money to pay off the remaining loan balance. With the mortgage paid off, the account will be listed as closed and paid on your and your ex-spouse's credit reports.
Paying off the mortgage is generally best for those who are near the end of their loan term and have only a small balance remaining or for those with significant financial assets to cover a larger loan balance. Because using cash to pay off the loan will reduce your liquid savings and can affect your ability to handle a future financial emergency, consider the financial consequences before erasing the loan balance.
Tip: Paying off the mortgage eliminates the debt, but it doesn't affect ownership of the property. Post-divorce ownership rights should be listed in the divorce decree. If ownership is assigned to only one person, the other will need to be removed from the deed.
A Clean Break
Keep an eye on your credit reports throughout the divorce proceedings and beyond to verify that payments are being made on time if you're not responsible for making them. If you notice missed payments, contact your spouse and the lender immediately.
Free credit monitoring from Experian lets you track your FICO® Score☉ Θ and sends alerts when there's a change in your Experian credit report, so you'll know right away if there's a problem. You can also get a free copy of your credit reports each week from all three credit bureaus at AnnualCreditReport.com.