Updated 26 October 2026
CM Law’s Ultimate 50 Things You Need to Know About Property Settlement During Divorce #35. Can property settlements affect credit ratings?
More property settlement questions
Can property settlements affect credit ratings
Yes, indirectly. Separation and the division of property can change who pays the mortgage, how much money is available and whether someone needs a new loan. Those changes can lead to missed repayments or new credit applications, which may affect a credit score.
Divorce itself does not create a loan default. MoneySmart explains that credit scores draw on borrowing and repayment information. A lender also considers affordability when assessing an application: a reasonable credit score does not guarantee that one income can support the former family mortgage. For separating couples in NSW, the practical priority is to connect the property settlement with workable debt arrangements.
Check who is legally responsible for each debt
Start with the loan contract, not assumptions about who spent the money. Being married does not automatically make you a borrower on your spouse’s loan. Conversely, moving out does not release you from a joint mortgage.
With a joint loan, each borrower may be responsible for the whole outstanding debt under the contract. If one stops paying, the lender may pursue the other. Check guarantees as well as loans. Credit cards need particular care: an additional cardholder is different from a joint borrower. In a primary and secondary card arrangement, MoneySmart says the primary cardholder is responsible for the debt.
Understand what your settlement actually changes
An agreement that your former partner will pay a loan does not, by itself, release you from the lender’s contract. An indemnity may give you rights against your former partner if you have to pay, but enforcing those rights can be difficult. The Attorney-General’s separating with debt guide explains this distinction.
A release generally needs the lender’s agreement, often through approved refinancing. Transferring ownership of a home is a separate step from being released from its mortgage debt.
Courts can sometimes make orders binding creditors. Section 90AE of the Family Law Act 1975 provides that power in marriage property proceedings, subject to safeguards. These include procedural fairness for the creditor, a just and equitable outcome, and protection against foreseeable non-payment of the debt in full. Have a lawyer check the proposed orders and the steps needed to secure an effective release.
A real case about the limits of debt transfer
In Commissioner of Taxation v Tomaras [2018] HCA 62, a wife sought to have her former husband substituted as the debtor for her tax liabilities. The High Court confirmed that section 90AE could empower a court to make an order binding the Commissioner of Taxation.
The decision did not simply transfer the debt. Statutory conditions still had to be satisfied, and the husband’s bankruptcy presented a serious obstacle. The Court addressed the existence of the power, not a credit-score outcome.
The lesson is practical: allocating a debt between former partners and legally changing the creditor’s rights are different matters. Neither a private promise nor the existence of family law proceedings should be treated as confirmation that a borrower has been released.
Organise payments while negotiations continue
Make a list of mortgages, personal loans, credit cards, buy now pay later accounts and guarantees. Record borrowers, balances, limits, arrears, repayment dates and direct debits. Obtain statements rather than relying on memory or your former partner’s account of what is owed.
Use MoneySmart’s separation checklist to review joint accounts, redraw access and passwords. Notify lenders of the separation and agree on safe contact details. Discuss account restrictions with the bank and your lawyer, while preserving arrangements for essential bills.
Document interim repayment arrangements and monitor whether payments arrive. If you cannot afford the required payments, contact the lender promptly. Waiting for the property case to finish can allow arrears to grow.
Make refinancing a realistic part of the agreement
If one person will retain the home, investigate borrowing capacity before committing to a payout or deadline. Property equity does not establish that the person can service the new loan. The lender will assess income, expenses, existing debts and its lending requirements.
Have your lawyer address who applies for refinancing, who pays costs, how repayments continue in the meantime and what happens if approval is refused. A fallback sale mechanism may be needed. Ask how the transfer, payment to the departing owner and release from the existing loan will be coordinated.
Check whether a loan enquiry is only an estimate or a formal credit application. Repeated applications can appear on a credit report; obtain advice about suitable options before applying widely.
If a release is promised but not completed, notify your lawyer immediately. Ask the lender to confirm your current liability in writing. Keep making any payments you remain obliged and able to make, or discuss hardship assistance; an approaching settlement date is not a payment extension.
Know the difference between late payments and defaults
OAIC guidance on repayment history explains that a payment made more than 14 days after its due date counts as missed for reporting purposes. Repayment history remains on a credit report for two years.
A default listing has additional requirements. Generally, the overdue amount must be at least $150, remain unpaid for at least 60 days, and the required notices must have been sent. A default generally remains for five years. Paying it afterwards updates the listing to show payment; it does not automatically erase the record.
Keep contact details current and respond to arrears notices. A settlement allocating the debt to your former partner does not automatically make an otherwise accurate credit entry incorrect.
Seek hardship assistance before the position worsens
Contact the lender’s financial hardship team if separation leaves you unable to meet repayments. Explain what you can afford and ask about suitable arrangements. A free financial counsellor can help you prepare. Do not assume payments are suspended merely because you have asked for assistance.
A hardship arrangement can appear on your report, but a credit reporting body cannot use financial hardship information to calculate your credit score. The report does not record the reason for hardship. Lenders can still assess your circumstances when considering new credit.
Temporary hardship markers are removed one year after the arrangement’s final repayment. For a permanent variation, the marker is removed one year after the arrangement starts.
Check reports and challenge genuine errors
You can obtain a free credit report every three months. Check the relevant reporting bodies because their records may differ. Look for unfamiliar accounts, incorrect arrears, duplicate entries and accounts that should show closure or payment.
Correction requests are free. Contact the lender or reporting body, identify the disputed entry and provide supporting statements or release documents. Incorrect information generally must be corrected within 30 days unless you agree to a longer period.
If the issue remains unresolved, use the applicable credit reporting complaint process, which may include the Australian Financial Complaints Authority or the OAIC. Accurate adverse information cannot simply be deleted because the property settlement is complete.
Raise financial abuse and obtain legal advice
If debts arose through coercion, financial control or unauthorised use of your identity, tell your lawyer and seek the bank’s specialist support through a safe contact method. Obtain advice about disputed liability before acknowledging a debt.
Since 10 June 2025, family law property reforms expressly address relevant economic effects of family violence, including financial abuse. Those circumstances may affect a property settlement, but do not automatically cancel a loan or remove a credit entry.
Speak with Christine about your property settlement
Ask Christine Manolakos and the CM Lawyers property settlement team to review the proposed debt arrangements, refinancing deadlines and creditor releases. Bring loan contracts, current statements, credit reports and any existing agreement or orders.
Keep written confirmation of releases and account closures, then check later statements and reports. Contact CM Lawyers before signing: this guide should always be checked against your circumstances by a lawyer.
This article provides general information for separating couples in NSW. It is not personal legal or financial advice. Have a lawyer check your proposed settlement, loan obligations and circumstances.
Key resources
Attorney-General’s Department separating with debt guide — Legal options for debts after relationship breakdown.
Family Law Act 1975 — Including section 90AE on orders binding third parties.
High Court decision in Commissioner of Taxation v Tomaras — The conditional power to bind a tax creditor.
MoneySmart divorce and separation checklist — Practical steps for accounts, loans and financial records.
OAIC repayment history and defaults — Reporting thresholds, notices and payment updates.
OAIC financial hardship information — How hardship arrangements are recorded.
OAIC credit report access and correction guidance — Free reports and correction rights.
Family law property changes from June 2025 — Official court guidance on the updated framework.
