How to react to these 7 cringe-worthy credit moments

Card declined? Wages being garnished? What do you say?

By Erica Sandberg

For people with bad credit, awkward moments are inevitable. When they happen, you may want to dig a deep hole and crawl in, but there are better ways to react. Here are the most common embarrassing scenarios involving credit and their more dignified responses. 

1. "I'm sorry sir, but your card's been declined."
When a waiter utters these chilling words, you're bound to flush crimson as your tablemates speculate about the state of your finances.

Squelch panic, says John Ulzheimer, president of consumer education for SmartCredit.com. Calmly explain that the magnetic stripe might have been damaged, and present a different card for the purchase. If it was declined because you're maxed out, though, and you don't have the cash or alternative plastic, excuse yourself and call the creditor to request an "opt in to over-limit fees." "This will allow over-limit transactions to be completed," says Ulzheimer. You'll be assessed a fee, but your reputation will be saved.

2. "Er, Jane, we need to discuss this wage garnishment issue."
It's dreadful to be sued for a debt, but it's more horrifying when your employer receives an wage garnishment order saying a portion of your wages must be turned over to your creditor.

Don't wait until the sheriff knocks to serve the paper, says confidence expert DeLores Pressley. Be proactive and request a meeting with your boss, saying, "I'm terribly sorry that a personal matter has extended to the workplace. I will get it resolved as quickly as possible." This frank approach can offset a negative opinion from your superior. Know, too, that you can't be fired for the garnishment (unless there's been more than one in a 12-month period), a fact that can inspire some confidence.

3. "Rent to you with your bad credit? Ha!"
Ready to sign a lease? If your credit's disastrous, you could be in for the same humiliation that Matthew and Fiona Peters, of Madison, Wis., experienced.

As young newlyweds, the Peters thought they'd found the perfect apartment. Yet in the crowded leasing office, the agent loudly announced, "There is no way we can rent to you with your credit. Its bad ... really bad." Each called their parents and begged for help, to no avail. "After the second call, we sat there red-faced wondering what we were supposed to say or do next," says Matthew Peters. "It was emasculating!"

Today, Peters gives advice to others in similar situations: "Keep your cool and don't take it personally. Having a high standard for all residents protects not only the owner's investment property, but the residents who live there as well." Emphisize your finer points. "You could say, 'My credit is bad, but I'm employed and make it a point to always pay for my housing first,'" says Peters. You may need to sweeten the deal by offering a co-signer, doubling the security deposit or paying rent in advance.

4. "Great, as soon as we see your credit report, we can complete your job application."
Pre-employment credit checks are the norm now -- and you'll want to hide if yours is riddled with big balances, missed payments and charged-off accounts.

Sure you can deny access to your reports, but it could prompt the hiring manager to toss your resume. So stand tall and disclose past problems up front. Honesty can only augment your chances. And relax about shamefully low credit scores. "The credit bureaus and their trade organization (the Consumer Data Industry Association) have gone on record countless times stating that they do not provide credit scores along with employment screening credit reports," says Ulzheimer.

5. "Darling, I can't wait to start a life with you -- buy a house, have kids ..."
Have atrocious credit, but are in the beginnings of a long-term relationship? Admitting it can be agonizing.

Like it or not, you must reveal the ugly truth. Then, commit to open communication and make amends, says Joe Rubino, author of "The Self Esteem Book." "Contact all debtors, make arrangements to clean up debts owed, start a savings plan, cut up credit cards and take full responsibility for managing future purchases responsibly." Strengthen your skills and your life-partner's faith through financial counseling, therapy or life coaching.

6. "I need to speak with Mary about a delinquent bill."
Whether collection calls or messages go to your workplace, a roommate or a relative, your private circumstances will become public.

First, end the phone calls. The Fair Debt Collection Practices Act prohibits third-party collectors from discussing your debt with anyone but you. And while they can contact you at work, if you ask them to stop, they must. Tell them you know the law and that you'll file a complaint with the Federal Trade Commission if they persist. Then, says Rubino, act with integrity and clean up your money mess. "Having done so, it is no one's concern except yours. If you feel the need to explain the calls to anyone, simply say that you have made financial arrangements to resolve some debt and the matter is taken care of."

7. "OK, Phil, go ahead and charge these expenses and we'll reimburse you."
A business trip is looming and you're supposed to book a hotel room and flight or rent a car. Uh oh, you've got no credit. 

Don't worry, you're not the only one without charging rights. About 29 percent of Americans live without credit. Just say you only use cash, and ask to pay with company funds or the company card. Few employers would balk at such a reasonable request.

Is it easy to confront such mortifying credit problems with grace? Of course not. But keep in mind that even a show of assurance looks -- and feels -- better than avoidance.

See related: How to rent a home if you have bad credit, How wage garnishment works -- and how to avoid it, 9 tips for job seekers with bad credit, Help for bad credit: Relationships, marriage and divorce, Know your rights under the Fair Debt Collection Practices Act

Published: March 7, 2011

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