Help! My Kid Messed Up My Credit

worried-parent

Whether you handed over your credit card too many times, co-signed a loan or made your child an authorized user on that travel rewards card, there is a chance that your credit took a hit. Your hope was that they’d be responsible, but giving them access to your line of credit can all too often become a free-for-all with serious consequences. If that describes your situation, here’s what you can do.

Co-Signers Must Pay — & Rebuild Their Credit

“If your child fails to repay according to terms, the co-signer will suffer the same consequences as the primary borrower when it comes to their credit rating,” Bruce McClary, vice president of Communications for the National Foundation for Credit Counseling, explained via email. Worse still, “if their child skips town, the lender can pursue the parents for repayment.”

A proactive step may involve refinancing the loan exclusively in the name of your child before the account falls into delinquency. If it’s a student loan in question, you can also refer your child for student loan counseling with a nonprofit agency, McClary said.

If the worst has already happened, however, there’s really not much you can do. (You could take your child to court, McClary said, but you would still be on the hook until the matter is resolved in your favor.) Take a long, hard look at your finances to determine the best way to repay the loan. Then in the meantime, focus on rebuilding your credit, one step at a time. To start, you’ll need to obtain a copy of your credit report — you can view your scores, updated monthly, for free on Credit.com — and check them for accuracy. (You go here to learn how to dispute any errors you might find.) You can also fix your credit in the long-term by keeping debt levels low, making all future loan payments on time and limiting new credit applications while your score rebounds.)

Credit Card Holders May File Charges

As with any balance charged to a credit card, the lender will identify the person responsible for repayment as the one named on the account, McClary said. The same rule applies for authorized users — the cardholder is responsible for charges on the card.

If your child went on a shopping spree without your permission, you may consider seeking legal advice regarding options for filing charges. You can also file a dispute of charges with the issuer and submit a police report to establish the claim of fraudulent activity. Finally, a parent can add a statement explaining the situation to their own credit report.

Remember, when giving your child access to your credit, you’re not just giving them permission to make purchases in your name, you’re putting your own credit on the line. Make sure you’ve gone over the value of having good credit — and how bad credit can hurt you both.

[CREDIT REPAIR HELP: If you need help fixing your credit but don’t want to go it alone, our partner, Lexington Law, can manage the credit repair process for you. Learn more about them here or call them at (844)346-3295 for a free consultation.]

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