When Loved Ones Ruin Your Credit

Dayton Uttinger

Balancing your work life with your personal life can a bit overwhelming at times, but you do it because friends and family are a big part of what make life worth living. Sure, sometimes you have to work a little later than you’d want in order to pay for a family vacation, or you may postpone a larger purchase after loaning your friend money, but that’s what you’re supposed to do. However, mixing your financial and personal worlds always has the potential for disaster. While most of us would think the worst that loved one could ever do is forget to pay us back, the truth is that your loved ones can impact your financial future irreparably, and one of the worst outcomes is a ruined credit score.

Your credit score predicts how reliable you are when it comes to paying back loans; whether you’re attempting to buy a car, a house, make any other large purchase, or sometimes even rent an apartment, your credit score can majorly impact the total price and interest on the loan. Large purchases like these can be milestones in your life, but they could be put on hold or even prevented altogether if your credit score is low enough. This is a worst-case scenario, but you’d be surprised how often loved ones ruin each other’s credit.

So, How Does This Even Happen?

Well, the good news is that it’s not always malicious. Sometimes, your loved one might have legitimately forgotten to pay off a debt, or maybe they didn’t realize that your credit was going to be affected by their decision. However, that doesn’t mean that the consequences are any less severe.

One of the most common ways for a loved one to mess with your credit is through a shared loan. Whether your parents cosigned on the loan for your first car, or your ex-husband has neglected to pay for the boat you bought together, both of your credit scores are tied to that loan. Your loved one might just be in the habit of sending in the check a few days late every month, but this can impact your credit score too.

Also, you might have several authorized users on your credit card. Now, it’s very hard to imagine how overcharging your credit card could be an accident, but they might not have a good grasp of even the most basic financial concepts. If that’s the case, you probably don’t want them as an authorized user in the first place. However, your loved one might have also rationalized that they’re not responsible for the damage, so they’ve had several shopping sprees on your dime.

In cases like that, they clearly made their decision without regard to your credit health. How you deal with your personal relationship after that is up to you. It’ll likely depend on the severity of the damage they’ve done to your credit and how close you were before. You can repair your credit score, even if your personal relationship is never fully repaired. Doing so can be difficult, especially if you’re not familiar with the procedure.

How Can You Go About Repairing Your Credit?

First, you should still follow all the basic advice about fixing your credit. Things like checking to be sure that your card isn’t being charged for services you’re no longer using or opening a secured credit card will help improve your credit score. However, it won’t deal with the primary issue; that your credit was dragged down by another.

Your first step is with the credit reporting company. Inform them in writing of what has transpired between you, your loved one, and your credit score. Even if they won’t do anything about it, it’s an important first step that shows that you’re attempting to contest the charges, and at the very least you want a record of this included in your file. That record can be shown to anyone that requests your credit report in the future, which is a huge step towards overcoming this problem.

However, some of the information surrounding credit repair is intricate (to say the least). The average Joe might have some trouble navigating through lenders, credit reporting services, and their own financial records. There are credit repair services that you can pay for, and especially if your loved one has been damaging your credit for a while, this might be the better route. Credit repair companies are savvy on the industry and will be able to clear your credit faster than you probably could.

When it comes to looking for a credit repair company, you are guaranteed to certain protections from the Credit Repair Organization Act. You’ll have a three day cancellation window in which you can’t be charged, and you’ll also be given a written contract that details their services, including how long it will take for your credit to improve, the total price, and any additional guarantees that the company provides. It’s also illegal for them to charge you beforehand, so keep that in mind while evaluating credit repair companies! Some of them are scams, but check their Better Business Bureau rating to be sure. Whether you decide to use a credit repair company or trek it alone, repairing your credit will take time, so don’t expect instant results.

What Should You Do in the Meantime?

So that’s the long game, but you also have to make sure that it doesn’t get any worse. Realize that you might technically be a victim of identity theft if your loved one used your credit without your authorization. Admitting this can go a long way towards helping your credit, but it also carries some pretty serious consequences. You will have to file a police report against them, which can be a difficult decision. However, it is also the most surefire way to repair your credit. You won’t be able to claim that you’re a victim of identity theft unless you file the report.

If, however, your loved one trashed your credit by being an authorized user or by being lax on a shared loan, you need to prevent those scenarios from happening again.

  • Remove them as an authorized user on your card.
  • Establish a fraud alert. This will make it harder for anyone to open a new account or obtain a new card under your name.
  • Consider a credit freeze as well. This will make it even more difficult for your loved one to abuse your finances, because it will block creditors from looking at your credit score, which will prevent them from approving any new accounts in your name.
  • Remove yourself from the loan if possible. This is much more difficult than it sounds and not always possible. Talk to your lender about your options. You might have to refinance the loan, sell the asset, or even go to court. However, if you really do not trust the other person to fulfill their obligation, it could very well be worth it.

Repairing your credit after a loved one, or a former loved one, has ruined it can seem like a Sisyphean task. While it is daunting, it’s by no means impossible. As long as you use all the available resources at your disposal, repairing your credit can be done with relative ease. Doing so might worsen your relationship with whoever ruined your credit in the first place, but it’s ultimately a necessary step towards trusting your loved ones and your financial future.

Still trying to recover from the damage to your credit score? Find more tips and guides at our credit score resource center.

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