Don't Underestimate a Credit Report

By Kristen Shearin, JD, CDFA® On 12/13/2024

As an attorney, I handle numerous discovery requests in my cases, yet it’s rare for anyone to request a client’s credit report. Overlooking this critical document is a missed opportunity for Certified Divorce Financial Analysts (CDFAs) to gain valuable financial insights. Both your client’s credit report and the opposing party’s report can reveal essential details that are often pivotal in divorce cases.

What Information Is on a Credit Report?

Let’s start by understanding the wealth of information contained in a credit report:

  1. Personal Information: Includes the individual’s name, address, date of birth, Social Security number, and employment history (current and past employers).
  2. Credit Accounts: Lists all credit cards, mortgages, car loans, student loans, etc., along with the creditor’s name, account opening date, credit limit or loan amount, and current balance. The report also indicates whether the account is open, closed, or delinquent.
  3. Credit Inquiries: Contains both hard and soft inquiries. Hard inquiries occur when lenders request a credit report for a credit application, while soft inquiries involve checks that don’t aNect the credit score, such as pre-approval oNers.
  4. Public Records: May include bankruptcy filings, tax liens (though these are often excluded by some agencies), and civil judgments.
  5. Collections: Details accounts sent to collection agencies, including information about the original creditor and the collection agency.
  6. Credit Score (Optional): Some reports also include a credit score, although this is often provided separately.

How Is a Credit Report Helpful in a Divorce?

A credit report can be a powerful tool for protecting financial interests and ensuring a clear division of financial responsibilities during a divorce. Here’s why:

  1. Understand Joint Financial Obligations
    • Identifies all joint accounts, co-signed loans, and shared debts.
    • Ensures no shared debts are overlooked when dividing financial responsibilities.
  2. Prevent Hidden Debts
    • Reveals debts or accounts you may not have been aware of, such as credit cards or loans taken out without your knowledge.
    • Protects against being held liable for undisclosed debts.
  3. Protect Against Fraud or Identity Theft
    • In contentious divorces, one party may misuse the other’s financial information to open accounts or accumulate debt.
    • Regular checks can help catch suspicious activity early
  4. Plan for Financial Independence
    • Shows your current credit standing and accounts in your name alone.
    • Helps evaluate your financial position and take steps to establish or rebuild credit post-divorce.
  5. Support Negotiations and Legal Proceedings
    • Provides a clear, impartial record of debts and financial obligations.
    • Supports property division and financial responsibility discussions.
  6. Ensure Accurate Updates Post-Divorce
    • Verifies that joint accounts no longer your responsibility are closed or updated.
    • Ensures debts assigned to your ex-spouse are correctly documented.

Can a Credit Report Help Identify Hidden Assets?

A credit report can uncover potential hidden assets or financial activities during a divorce by providing a detailed view of accounts and obligations. Here’s how:

  1. Revealing Undisclosed Accounts
    • Lists joint accounts, including loans or credit cards that may not have been disclosed.
    • Highlights individual accounts with activity, which could signal undisclosed financial holdings.
  2. Identifying Suspicious Transactions
    • Tracks large cash advances, frequent transactions, or significant debt accumulation.
    • Flags activity that doesn’t align with disclosed income or assets.
  3. Tracking Loan Applications
    • Reveals hard inquiries that indicate attempts to secure funds or assets.
    • May reflect hidden property purchases, business dealings, or investments.
  4. Uncovering Business Activity
    • Shows loans or credit lines for businesses, pointing to potential undisclosed income or assets.
  5. Locating Hidden Property or Investments
    • Hints at real estate or investment holdings through mortgages, equity lines, or secured loans.
  6. Linking to Unknown Financial Institutions
    • Identifies financial institutions tied to unfamiliar accounts, signaling potential hidden assets.
  7. Spotting Debt Tied to Unreported Assets
    • For instance, a mortgage or car loan may indicate the existence of property not disclosed in proceedings.

How Do You Obtain a Credit Report?

By law, your client or the opposing party is entitled to one free credit report annually from each of the three major credit bureaus—Equifax, Experian, and TransUnion— through AnnualCreditReport.com. Avoid accessing a spouse’s credit report without permission. Unauthorized access may be illegal, but during divorce proceedings, a court can order full financial disclosure, including credit reports. Work with your attorney to request credit reports as part of the discovery process.

By thoroughly reviewing credit reports, you can uncover critical financial details, ensure fairness, and protect your client’s financial future. If this is not on your list of documents to request and review as part of your divorce financial analysis, it should be.

Tagged with: cdfa, divorce, credit report


Blog Disclaimer: The opinions expressed within these blog posts are solely the author’s and do not reflect the opinions and beliefs of the Certitrek, IDFA or its affiliates.