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I'm ruining my mom's credit

Dear Dr. Don,
My mom has excellent credit, but she co-signed a loan with me to get a 2001 car. I missed two payments, and the dealership's financial services, I assume, reported this to the credit reporting agencies. They called me and said the two payments I missed go on the end of my lease, and I have to pay an extra two months more than when my lease would be up.

My mom is also leasing, and her lease is up in three weeks. She recently applied for a loan to lease another car, and her credit report showed my 60-day delinquency. Is it possible for the dealer to take that off now that they've added the two payments to the end of my lease? My mom never had bad credit. Do you have any suggestions on how to help out my mom? I feel so bad. After all, she tried to help me out, and I messed her up.
Upset in Jersey,
Jennifer Jangle

Dear Jennifer,
There's not an easy solution to cleaning up your mother's credit, or for that matter yours. From what you described, the financing company modified your lease terms to accommodate your financial situation, but that doesn't mean that your credit report is clean. Your credit report is likely to list the same 60-day delinquency as your mother's credit report. Get a copy of your credit report to know for sure. You can order it on Bankrate's Shop & Save page.

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The good news is that one 60-day delinquency isn't going to irreparably harm your mother's credit history. If her credit is as good as you describe it, she can weather this problem without losing her ability to find a good lease rate on a new car. Negative information stays on a credit report for seven years. As time passes, the negative information becomes less important than recent credit information.

The Fair Credit Reporting Act requires creditors to remove inaccurate information from a credit report through a dispute process. But if the information is accurate, there's no compelling reason for the finance company to remove the information at your request.

Even without your late pays, co-signing your lease impacted her ability to borrow. Lenders estimate how much debt a customer can carry without being a credit risk. Your mother co-signing your lease has reduced her capacity for additional credit because of her commitment to stand ready to make the payments on your lease.

In addition to the 60-day late problem, the capacity issue will influence her ability to get additional credit. So, even though the end of her current auto lease frees up credit capacity, your lease on her credit report will limit how big a lease payment lenders will approve for her new car.

The best thing you can do for your mother is to make your lease payments on time. If you can't make a payment, tell her about it. She can then decide whether she wants to step in and make the payment for you. When she co-signed the note, she agreed that she was willing to make the payments if you don't. Don't let her get blindsided by any more late payments showing up on her credit report.

-- Posted: Jan. 22, 2002

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See Also
Getting out of a co-signed auto loan
co-signing a loan that isn't getting paid
When a parent ruins your credit
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