||Ask Dr. Don
When a parent ruins your credit
My parent has a credit card on a card account where I am the primary
cardholder. I am 28 years old and opened this account when I was
21. Now my parent owes them $10,000, and my credit is ruined. What
can I do to resolve this issue? Is there a way to give my parent
full responsibility of the card?
As primary cardholder, this is your credit card account. It's like
co-signing a loan. You've agreed to be responsible for the debt.
It's very unlikely that the credit card company would let you back
away from this obligation, especially if the account is in bad standing
because of your parent's missed or late payments.
What kind of shape is the account in? Have you missed
payments, incurred late or over limit fees, and seen your interest
rate increase? Or are you just overwhelmed by the outstanding balance
on the credit card?
Regardless, the first step is to close the account
to new purchases. Do this by phone and confirm by sending a letter.
You can't close the account without paying off the balance due,
but you can stop new purchases.
Talk to your parent about what you can expect from
them in paying down this debt. You're not letting them off the hook
when it comes to paying off the balance; you're just taking the
steps necessary to rebuild your credit to the point where you can
hope to accomplish your financial goals.
If you can't figure out a repayment schedule, then
it's time to talk to a credit counselor. Credit counselors can sometimes
negotiate a reduced interest rate on your debt and may be able to
get the creditor(s) to agree to partial payment in satisfaction
of your debt.
Credit counseling can have a negative impact on your
credit rating if your creditors report that you didn't pay your
obligations as agreed. But credit counseling is better than bankruptcy
because it shows a commitment to paying your debts. That commitment
should help you as you rebuild your credit.
-- Posted: July 25, 2001