The Credit Guy

When family members ruin your credit

The Credit Guy columnist Todd Ossenfort

Todd Ossenfort has been chief operating officer for Pioneer Credit Counseling since 1998. He writes our weekly “The Credit Guy” column, answering reader questions about credit counseling and debt issues.

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Question for the expert

Dear Credit Guy,
My sister was an authorized user on a credit card of mine. She ran up a huge debt and is having a hard time paying it. She is delinquent and my credit cards have been canceled because of this. How do I repair my credit and get the debt in her name? — Kimberly

Answer for the expert

Dear Kimberly,
You use the word “was” in your question, and I am hoping that the use is correct and your sister can no longer charge on that particular credit card account or any other credit card account of yours. If you have not already, do not pass “Go,” and do not collect $200, but go directly and take her name off all your accounts.

To transfer the debt into your sister’s name and off your account, your sister will need to be able to qualify for a credit card in her name only. My suspicion is that the reason she was added to your account as an authorized user is that she could not get credit on her own. If your sister’s credit is not very good, it is unlikely in the current tight credit market that she will qualify for a credit card with a credit limit high enough to transfer the debt.

I would, however, recommend that she apply for a balance transfer credit card to see what happens. If she does qualify for a card, she can transfer as much of the balance that is owed on your card as her new card will allow. That way, at least a portion of the debt will be her financial responsibility.

Unfortunately, if your sister does not qualify for a card in her own name, you will continue to be responsible for her charges and will ultimately have to pay what is owed or further damage your own credit. I would not let her off the hook, however, and would continue to request that she pay what she can on the charges she made.

As far as repairing your credit, time heals all wounds and improves credit. Moving forward, you will need to add positive, paid-on-time and as-agreed account information to your credit report and, with time (two years or more), your credit will improve.

Continue to pay off any balances on your credit card accounts that have been canceled. The fact that the accounts were canceled is a negative, but not paying the balances that are owed would be much worse for your credit history and score.

In addition, you will want to be sure to pay what is necessary to make sure the account that your sister used is made current as soon as possible. By paying the amount that is past due, you will be taking the sting from the negative listings on this account. The late payments will still show up on your credit report, but the account will be listed as “current” moving forward and that will help to improve your credit.

While you can’t pick your relatives, you can decide not to provide financial support to them.

Take care of your credit!

See related:Authorized user or joint account holder?, Bailing family members out of debt: Think twice, When family members use ‘secret’ credit cards

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