Your options aren't pretty when a relative gets plastic in your nameFamily members are a leading source of identity theft; guard yoursBy Todd Ossenfort
Dear Credit Guy,
A
family member activated an offer for a preapproved credit card from our home
phone in my name and accrued more than $3,000 in online and store purchases.
The company refused to accept my explanation that I did not open the account
nor did I make the transactions. They said it is more likely a family member,
and if I don't want to accept responsibility, I should get a police report,
which is very hard for me to do since it's a family member. If I pay the
balance in full, how much impact will it have on my credit? How can I correct the
damage done on my credit? I had excellent credit. Your advice is very much
appreciated. -- Cindy
Dear Cindy,
Identity
theft by a family member is very troubling and comes with some hard decisions.
As you learned from the creditor, if you want to claim no responsibility for
the debt, then you must report the incident of the account being fraudulently
opened in your name to the police. When a family member is an identity thief, rather than a stranger, deciding to reporting it to the authorities as theft becomes much
more difficult.
Alternative No. 1: Pay it yourself
It
sounds like you are leaning toward not reporting your family member. If that
is the case, then you need to do several things. First on the list is to close
the account, if it has not already been closed by the creditor. If you have not
already done so, go to annualcreditreport.com
and get copies of your credit reports from each of the three major bureaus. The
account may already be listed as "closed by creditor," but if not, call the
creditor at the contact information listed on your report and request that the
account be closed.
Next,
decide the best way for you to handle paying the balance due. You will want to
avoid putting yourself in a financial bind, and I would
hate for you to use up a good portion of your savings cushion to pay off this
debt. You might consider an affordable monthly payment if you don't have enough
cash on hand to make payment in full.
Then,
contact the creditor and explain that you are planning to make good on the
obligation and tell them your plan to pay off the balance. If the creditor is
not willing to accept your payment plan, contact a reputable nonprofit credit
counseling agency (such as a member of the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling) for assistance. Your counselor
can negotiate with the creditor on your behalf. Even if the creditor pushes, do
not agree to more than you can afford to pay each month.
Alternative No. 2: File police report
Should
you decide you do want to file a police report so that you don't have to pay
for items you didn't purchase, I recommend letting your family member know
ahead of time that you have made the decision to file. It will likely be an
uncomfortable discussion, but it could turn into a positive. To avoid dealing
with the police, your family member may opt to pay what he or she owes. Whether or not you
decide to involve the police, I would give this family member
the opportunity to pay up.
As
far as your credit is concerned, unless you file a police report, the item will
remain on your credit report for seven years from the first date of
delinquency. Paying the balance due will help with potential creditors
(creditors are looking to see if you met the obligation, even if you did so
late), but will not have an immediate positive affect on your credit score. You
have the option of including a 100-word statement on your credit report in which you can explain that the account was identity theft by a family member and you
chose not to file a police report.
As
long as you continue to manage your credit in the positive way you did before
the theft, your credit will gradually increase over the next two years and you
will soon be back in the same good credit score range you were before the theft.
Take
care of your credit!
See related: When family members ruin your credit, When a family member steals your identity, 8 steps to picking a credit counselor,
How to add a written statement on your credit report, Glossary of common credit card terms
Todd Ossenfort is the chief operating officer for Pioneer Credit Counseling in Rapid City, S.D. Pioneer Credit Counseling has been a member of the Association of Independent Consumer Credit Counseling Agencies since 1997.
The Credit Guy answers a question about a debt or credit issue from a CreditCards.com reader each week.
Send your question to The Credit Guy.
Published: March 15, 2010
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