When Your Kids Trash Your Credit Score
You’re used to your kids draining your wallet: no matter what stage of life they’re in, they always need something, whether it’s more diapers or rent money. But that’s part of a parent’s job, to support their kids through tough times. They’ve got to learn independence, of course, but every kid stumbles a couple of times through life, and parents can help cushion the fall. However, these stumbles can be significant enough to drain more than your wallet. Sometimes, they can hurt your credit score too.
Why Does Your Credit Score Need Rebuilding?
You paid your bills on time, always kept your spending in check, and used your credit card wisely. There were bumps along the way, of course, but you always recovered. That behavior was meant to be a model that your kid could use in their own life, but your kid didn’t pick up on that message.
The best case scenario is that your kid misused your credit card; maybe they made an expensive purchase online, and now you’re stuck with the bill. However, something like this is unlikely to ruin your credit. It certainly will put a bump in your budget, but the average kid isn’t buying anything online that you’re incapable of paying back — at least, not in the short term. Your credit card bill might be outrageous, but it’s probably not back-breaking.
The more likely case is that your kid isn’t paying on a loan that you co-signed for. This is more common than you’d think. When your kid is just starting out, they don’t have any credit to back them up, but they still need a car to get to work or an education to even get a job. They turned to you for help, and of course you vouched for them. They’re your kid.
Co-signing for your kids’ car or student loan can be a great way to help them get ahead, but it’s not without risk. If your kid behaves like most young adults, they’re not financially responsible. And when they “forget” to make payments, your credit is on the line. How can you repair your credit quickly while also keeping your relationship with your kid?
How Can You Fix Credit Mistakes Your Child Made?
The first thing you need to do is sit down with your kid and lay out who is responsible for what. Clearly, they are the ones that took out the loan, so they ought to pay it back. However, they might be unable to make payments. If that’s the case, then they need to figure out a better budget. They might need to move back in to save money for a while; that’s certainly a better alternative than your credit continually falling. However, you don’t want them to take further advantage of you either. Bill Pratt of the Money Professors, a group that promotes financial literacy for college students, suggests that you make a contract detailing how much rent they’ll owe every month, how long they plan on staying, and any other responsibilities they’ll have (like their unpaid loans!)
However, if your kid refuses to pay off their loan, then you have a much bigger problem. Removing yourself as a cosigner is a hassle, to say the least. Your kid could try to refinance the loan, but it’s unlikely that they’ll have credit high enough to qualify. Some student loan lenders will remove your name, but only after a period of timely payments. It might be in your long-term interest to pay off a portion of the monthly bill, just long enough to pull your name from the loan. It might be the only way to save your credit.
This is a tricky situation to navigate, since you also want to see your kids’ credit improve as well. The best solution is to pay back the loan, but if that is impossible right now, a credit repair agency might have an answer. They know the ins-and-outs of the industry and can argue the facts in your favor. Depending on how severely your credit was damaged, this might be the quickest and most thorough way to reverse the tide.
Ultimately, this doesn’t have to ruin your credit or your relationship with your child, as long as they are willing to learn from their mistakes. It is a fixable situation, although no one said it would be easy. This is one hell of a mess to clean up, but this isn’t one that you can just walk away from either.
What else can harm your credit score? You can find more information at our credit score resource center.
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Dayton is a chronic Wikipedia addict, which is detrimental to her social life but stellar for her writing. She resides in Boise, ID, surrounded by her own frantic outlines, highlighted encyclopedias, and potatoes. The latter was not by choice.
This post was updated February 28, 2019. It was originally published August 11, 2017.