Re: Parents have Credit Cards in my name screwing my Credit Score
02-21-2011 01:57 AM
Hi. I really need help, coz it is getting frustrating and effecting my relationship with my parents - they have 3 credit cards in my name (It is NOT my debt, it is theirs, but with my name on the paper. They also make the payments). So, I have almost $100,000 outstanding balance ($33,000 on credit cards and $67,000 on school loans). Having this much debt, plus I missed a couple of payments on 2 of my school loans, my Credit Score is really low. I do my best to improve my Credit Score, putting my all to lower Utilization Ratio, but it does not help because the part my parents owe is 3 times greater than all of my credit cards together.
In my name, they have $25,000 outstanding balance with 88% Utilization Ratio on 3 cards, I have 5 credit cards with $8,000 balance and 60% Utilization Ratio. My parents pay minimums only on the cards, always in time. But creditors keep reducing credit limits on 2 cards, and the 3-d card is closed with $4,000 balance on it. Parents can't (don't want) to pay extra on the cards. I hardly convinced them to pay $100 over the minimum on the card that has 100% utilization ratio and $14,000 balance.
I got married last year, and we have dreams/plans, but everything crashes into the debts we have (even though we don't owe 3/4 of it!). I want these cards off of my hands. I talked to my parents many times, but "there is nothing more they can do". I tried to google what we can do to put the debt from my name to theirs, but couldn't find anything. Thought about Borrowing against home equity, but they live in a mobile home (info I found: hard to get a loan for it). If you guys have any ideas or suggestions, I would be more than happy to hear them. Any your help will be GREATLY appreciated!
I'm sorry about the situation in which you find yourself and hope that a way can be found to solve it to everybody's satisfaction.
You haven't mentioned whether you allowed your folks to open credit accounts in your name or if it was done without your knowledge. However, even if it was done without your knowledge, dropping a dime on your parents -- and make no mistake about it, reporting the accounts as not yours is very likely to cause repercussions for them -- may cause you more harm than good.
First of all, going from 88% utilization to 60% utilization may not even have a significant impact on your credit score. 60% is still considered very high.
In my opinion, the first thing you want to do is limit any further exposure you have to further, new problems. You'll need to have a frank and firm discussion with your parents and tell them that their cards must -- without exception -- be closed. Of course, they still continue paying on the current debt, but each and every card is unequivocally closed to new purchases, end of discussion. Then take possession of the cards, cut them up and call the card issuer to have the accounts closed. Keeping these cards open is just an accident waiting for a place to happen -- an invitation to have any balances paid down ultimately run back up again.
Any cards that are actually used by you should be kept under lock and key so nobody can access them and run up balances with them.
Then come up with a plan so that your parents can pay down their debt in the shortest time possible. On $25k in debt, just paying the minimum means that the debt will not be paid of for something like 12 years if you are lucky enough to have only a 13% APR and make a 5% minimum payback each month. If the APR is higher and the minimum payment lower, you could be looking at well over 30 years and cost you 6 times more than the original debt of $25k.
Make them stick to the plan.
The good news is that your credit score will improve almost overnight once the balances are near being paid off. The damage from late payments, however, is not that quick or easy to recover from. Ensure there are no more late payments and if at all possible try to goodwill those that do appear so that the creditor removes themm from your credit report.
Many people have recommended that you report the accounts as being unauthorized. Assuming you can successfully do this without committing fraud yourself, there's the very real possibility that your parents will face perhaps very serious problems. If that's something that doesn't worry you, and the accounts really were unauthorized, then fine. Still, I don't see your credit score improving any until your utilization is far, far lower -- especially considering your recent lates.
I am not at all certain how closing the accounts used by your parents will hurt your credit score. My understanding is that accounts closed with a balance not only still report for 10 more years, but that the balance and credit limit still calculate into your utilization. As far as I see, the only thing you accomplish is making sure that balances your parents stay down never end up increasing again. It also prevents interest rate hikes and credit limit decreases which will actually make your utilization even worse.