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My Parents Ruined My Credit! Print
Wednesday, 21st February 2007 (by J.D.)This article is about Ask the Readers, Debt, Real-Life
Last month a reader wondered how her family’s credit history affected her own. This month Daniel has a slightly different problem: his parents did ruin his credit, though indirectly. He writes:
When I was 19/20 years old, my credit was ruined. I had a decent job and got a few credit cards. I went to college, which my parents said they would pay for and support me during, so I quit my job. When money was tight for them, they said I should use my credit, and they would pay it off. They failed to do that and ruined my credit to the tune of about $5,000.
I am now 25 and I’m starting to get back on my financial feet. I have often heard that bad credit only stays on your credit reports for 7 years. Is this true? Are these charges going to disappear, or is that just an urban legend? What is my best plan of action? Should I pay these bills off? Or should I just wait a few more years for them to disappear? From what point are the 7 years counted?
I’ve already obtained my free credit reports and have begun correcting issues and asking the credit agencies to verify every negative charge, just to see if any of it comes back clean. My score right now is 500 = “Very Poor.” I have not made any payments and I have not ever spoken with any of the creditors. All of the bad accounts are closed by the creditors and all of my student loans are in good standing/paid to current. I know I owe this money, and I don’t want a free ride, I just want to know what my best options are.
I’ve written about similar subjects before:
But I’ve never encountered anyone with these sorts of specific questions. Do any of you have experience with similar situations? How did you handle things? What worked? What didn’t? What sort of advice can you offer Daniel?
Note: This question was originally posted to AskMetafilter.
February 21st, 2007 at 6:15 am
Perhaps his parents coerced him into quitting his job for some reason, but honestly, don’t blame your parents. When you’re 19/20, you’re still naive (obviously I was), but that doesn’t mean you should be responsible with your own finances and future.
I say “coerced” because one of our good friends moved back home with her parents to Indiana after much pleading with her mom. Her mom just wanted to quit her job here and move home without even getting a new job. She’s never going to move out of that house now.
February 21st, 2007 at 6:23 am
I too was in a similar situation. When i graduated college i pretty much blew off my student loans and ran my credit into the ground. I think you are on the right track. I did the same thing you did (order credit reports, dispute bad claims..) The next thing you need to do is get a credit card to have something to establish good credit. I was in such bad shape i couldnt get a normal card, so i had to get a secured card (one where you send them a few hundred bucks, and that is your credit limit). When you get this card, use it every month for a few purchases and then be sure to pay it off in a timely fashion. Remember the banks want to see responsibility, so if you can get a few cards/loans..or something to show that you are responsible by making regular monthly payments, your credit will come up in no time. And yes you are correct, the dings go away after seven years, and if im not mistaken, it actually may be better off if you dont pay bills taht are almost at the seven year mark, as paying them now will reset the clock, as by law, they have seven years FROM THE LAST DAY OF ACTIVITY on the account. Not 100% sure on that but i believe it to be the case. The good news is , i went from having a secured card to having 4 or 5 with 20k limits (no balances though…:) ) and a rating near 800 in a few years. Rememebr etsablish credit, and keep up on it.
February 21st, 2007 at 6:40 am
My understanding is ‘dings’ get removed after seven years, not the entire credit card history and it is seven years ‘after’ the ding. I’m not exactly sure how they add up though. In a more common situation if you were 30 days late 6 years ago, in one more year that would be removed from your history reguardless of whether you use or have the credit card anymore. If you have never made a single payment on your credit card I assume that means you have a 90 day+ late ding for every month since you opened the cards and so until you start paying them off they aren’t going to be leaving your card.
I’m suprised the creditors haven’t tracked you down, if you only ower $5,000 on a few cards I think the best solution would be to save up $5,000 then start contacting the credit cards one at a time. Tell them your story and let them know you want to settle the balance. Get them to cut off the interest/fees which have been racking up for ever or see if they will accept a payoff and remove the dings from your credit score (your probably can’t get both). Get it in writing and then pay it off. Do this with each card.
As it stands now you have no ‘available credit’ since all your cards a maxed out and closed and a lot of unsecured debt (student loan/closed cards). Even without removing the dings, paying them off will help some.
February 21st, 2007 at 7:27 am
Anything negative is removed from your credit report after seven years.
As for the debts; you can check your specific state’s statute of limitations on debts by browsing through an article I’ve recently written here:
http://www.brokeass-student.com/how-to-fight-back-against-collection-agencies/
Depending on how old the debts are and if they can properly be validated, you may be better off concentrating on building new credit and riding out the dings on your credit reports (The dings on your reports will probably take longer to expire than the actual debts will).
I’d advise applying for a credit card and using it often while responsibly paying off the balance each month in full.
If you can’t get approved for a regular credit card, do the secured credit card route for a few months. A secured credit line and a real credit line look exactly the same on your credit history. It’s an excellent stepping stone if your FICO is severely damaged.
Good luck! And keep your head up. Through wise decisions, you’ll eventually get to where you’re aiming for in no time again.
=^..^=
February 21st, 2007 at 7:41 am
Dude… you gotta pay the credit cards, they don’t just disapear! There’s a big difference between your “Credit Report” and your “Credit Cards.” I don’t mean to sound like I’m talking down to anyone, but when you talk of things getting wiped clean, that would be to the aforementioned ‘dings’ on your Credit Report. If you owe money, regardless of whether your parents promised to pay it or not, then you owe money and you have to pay it back.
February 21st, 2007 at 8:13 am
From what I’ve heard, you shouldn’t contact a company until you’re ready to pay them, as that starts the seven year clock back at zero.
February 21st, 2007 at 8:17 am
I had a similar situation where I knowingly didn’t pay accounts and they were all closed out for me with 90+ days late, including a car repossession. (Yes, I had a very irresponsible 20’s.) It wasn’t until I was getting collections calls that I started to repay any of the $14k.
It’s true that the accounts fall off your credit report from 7 years* after that last date of activity (i.e. when the account was closed or when you made the last payment). (*Like everyone else said, the years depend on the statute of limitations in your state.) However, if they are all closed out for you, you will probably have a very hard time getting a regular/unsecured credit card. You might want to start with a secured card now.
I paid off the $14k within 3 years and have had a secured card for a year but *because* my accounts were closed out for me and I have a reposession or settled suit (I did make some settlement payments on some of the amounts) on the credit bureau’s report that they used, I am denied for an unsecured card until that goes away. Keep in mind - all of my accounts are settled/paid off and I am still being denied.
If you are anywhere near your statute of limitations date I would say to not pay it and let it fall off your report. Do *not* speak to any collectors about any payment plans or any money owed when they call or it will count as a verbal agreement that you made to pay them back. Start with a secured card now and when those fall off your report you can upgrade.
However, if you have 5-7 years left on them or so, it might be easier to pay them back so they are are settled on your report and there is no outstanding balance…and still start with a secured card. If you don’t have repossessions or settlements, you might have a better shot at being upgraded to an unsecured card (and then get better credit limits) in the nearer future.
In a perfect world I would like to give advice that says, “Be honest, pay back all your debt, it will benefit everyone!” but in reality when your accounts are so late that they are involuntarily closed like mine were, it probably would have been easier had I just not paid anything b/c paying them didn’t make much of a difference, really - they just see settled and 90+ late accounts that were paid off instead of not paid off. I essentially paid off $14k for them to still look at my credit reports like I didn’t pay anything off and deny me an unsecured card until the statute of limitations gets rid of them anyway!
So, I think it depends on where you are in terms of your statute of limitations term.
February 21st, 2007 at 8:31 am
Chris, debts do in fact expire after a certain amount of time passes. It’s called the Statute of Limitations. It is generally four to six years but varies from state to state.
Daniel’s first step as far as his debts are concerned would be making sure they are still within his specific state’s Statute of Limitations and haven’t legally expired.
=^..^=
February 21st, 2007 at 8:38 am
You might try joining a credit union that has a credit building program. Mine consisted of loans, starting very small, and paying them back. It took three years but I do have some good marks on my report due to that program. I understand some of the folk’s telling you to pay them back it is the right thing to do, yadayadayada. My experience with the credit agencies is that even if you have a bad mark on your report, that is not valid, they have no real motivation to do what the law requires. I have fought with them for years. I am on the verge of paying a lawyer to sue.. They are a necessary joke of living these days.. good luck!
February 21st, 2007 at 8:52 am
ok what i would suggest is read a few websites. hope this is ok but this is one i have read quite a bit to start rebuilding my credit.
http://consumers.creditnet.com/Discussions/
i am not assosiated with the forums except i read allot of the posts.
anyway as long as the accounts show closed they will fall off 7 years passed the closed date. you do not need to call them or anything. and i have heard horror stories of people who have paid full amount and when they did they had 7 years of bad debt from the time paid as the way it was reported to the CRA’s. hate to say this but let the debt fall off. was listening to suzi orman who said sometimes its best just to let it fall off but always make sure you are learning from what has happened. I went from a 500 to a 670 pretty quickly with some pretty nasty debts. just get a cheap 250 limit credit card and only use it for grocerys and when the date comes up pay it off completely. as a couple months goes on yu can get a second card and only use it for certain things. in about a year youll have pretty decent credit. keep those accounts open as credit history helps. the older the card or line of credit the better. take those cards and freeze them or put them in a safe deposit box or some place you do not have easy access. and if you do its not hard to pay them off. good luck.
February 21st, 2007 at 9:17 am
The best way to fight poor credit is to build good credit. You can find a ot of great help by reading and asking questions over at http://www.creditboards.com - you can do it yourself for free. Or you can hire a company to help you. I hired Fair Credit Law Firm because they have seveal programs, including one tailor made for investors. They have walked me through disputes, corrections, and made sure I did everything correct when settling an old account, as well as have given me specific stratgies for how to build my credit and keep it high for real estate investing. Highly recommended because credit can open or close doors for you, and you have to take an active role in your own. Best wishes!
February 21st, 2007 at 10:31 am
If you slacked on a credit charge you should have disputed, and it now was charged off years ago, is it likely you can still dispute the charge with the creditor? If not is it likely they’ll consider rehabilitation and delete the ding?
February 21st, 2007 at 10:31 am
someone needs to make a credit repair forum as good as GRS.
February 21st, 2007 at 11:48 am
Thank you so much for this article. It sounds like Daniel and I are in the same boat. I too was given the ever glorious “I’ll pay off your credit cards” memo by my dad while in college. I tried not to rely on it too much, and I kept on top of all of my credit cards, paying off what I could as a financially unstable college student. But apparently the bills got to be too much for my dad to pay, he started being late on payments and racking up even more debt with late fees. So I change the billing address on all of my cards, so the bills came to me directly. I was willing to take full responsibility. But I didn’t realize just how far gone it all was. Making $150+ minimum payments on 9 cards wasn’t possible for me. And now it’s two years later and all of the cards have been charged off. There are even two cards that have just disappeared completely, I haven’t heard from them or a collection agency representing them.
I’ve come up with a repayment plan for all cards, because I do understand that I need to take responsibility for this. But should I even consider a repayment plan right now, with the two MIA debts?
I had no idea about getting the debts validated, mainly because I KNOW that I owe this money. But should I still get the debts validated? Is it too late to get them validated? (They’ve been charged off for over a year)
Are there steps I need to take before beginning repayment? And if so, how exactly are those steps affecting the repayment process/debt status?
I feel the need to be thoroughly educated on something before I do it, i.e. repay $26K of debt. I keep feeling like I’m pushing this off, but I really just want to be 100% certain of what I should be doing.
February 21st, 2007 at 1:37 pm
Try contacting Suze Orman, I think you’d make a good case for her show. If not, check out the forum on her site. On one of her shows, she talked about how to handle collection agencies and what to do to fix your credit score. Her book Young Fabulous and Broke is pretty good too as it covers things about credit scores. Believe it or not, Suze was once broke too when she was younger. She sure helped me become smarter with finances.
February 21st, 2007 at 2:29 pm
couple good suggestions already, such as statue of limitation and avoiding contact w/ collection agency. any communication w/ the collection agencies should be through mail.
as mentioned, check out http://www.creditboards.com/forums/ . It is IMO the best credit forums on the net, and I can guaranteed that if you read it fully (and eventually ask questions regarding your specific situation), you’ll come out knowing better what your next step should be.
February 21st, 2007 at 2:37 pm
Sorry, your parents didn’t ruin your credit, YOU did. At 18, you legally signed a binding contract. It doesn’t matter if your parents said they would pay it–it sucks that they won’t, and will likely damage the relationship with them, but the debt is yours and you are (morally, legally) obligated to pay it.
After seven years, most of these will fall off, but depending on the statue of limitations in your state, creditors may call you for years after that. Your best bet at this point is to contact the creditors (or the collection agency which purchased the debt) and offer them a settlement–only do it when you have the money to pay what you offer in cash, and don’t pay by post-dated check, check by phone, or anything else (send a money order, certified mail, return receipt). In your negotiations, ask them to mark the debt as closed in good standing (I forget what the exact wording is here) in writing before paying so that it will no longer be a black mark on your record. Be aware that contacting even one of these creditors may make them all start calling. However, it’s the right thing to do, and you should do it.
Check out http://www.creditboards.com for more information about getting these companies to settle with you. I’d also recommend Dave Ramsey or a similar “baby steps” program to get the debts in an order that works for you to whack them out. If you’re really not trying to get a free ride, you’ll forget the “seven years” clause and start paying these off right away.
February 21st, 2007 at 2:39 pm
Oh, and the seven years clause does NOT necessarily start from the time the debt was incurred–it can be from the last time they were in contact with you, which includes sending you a bill or calling you at your last known location.
February 21st, 2007 at 3:02 pm
I concur with Cap. There is some false information in these above comments and http//www.creditboards.com/forums/ is a great starting resource for anyone dealing with credit concerns.
February 22nd, 2007 at 11:43 am
Former Equifax employee and bill collector here…As I recall, the rule is that items are removed from your credit report seven years *after the date of last activity*, meaning that if the credit provider continues to update the reported item, or obtains a judgement against you, or lists the debt with a collection agency, each reported activity resets that 7 year clock. Also, the bureaus don’t police the reporting periods very tightly, so it may take longer for the items to disappear unless you specifically request them removed. Hence the need to check your report regularly (at least every six months recommended).
Most credit card companies will accept settlement on amounts owed after a specific time. They consider them either writeoffs or having sent them to a collection agency, will want to pay as little commission as possible. Contact the provider or their representative and ask about a settlement. If you don’t ask you don’t get.
The important thing to remember is DEAL WITH IT! Don’t ignore it in the hopes it will disappear. You only increase the possibility of legal action and rack up interest. A judgement sticks around a lot longer than most other items, and is very damaging.
February 25th, 2007 at 7:29 pm
The same thing happened to me. Here is what I did.
I was paying the amounts off but very, very slowly (less than the min) because I couldn’t afford any more. Amex didn’t like that so they charged off the amount. It will go off my credit report next year, but I am debating on whether I should pay it off anyway so should a reason come up where I need an Amex (like a job) I won’t be embarrassed.
For another credit card, I took a loan from my credit union and paid the credit card. Then slowly paid off the loan.
I have also cut all contact with my family.
July 4th, 2007 at 8:19 am
Okay, so I am the sneaky snake, sort of.
I charged up a bunch of debt about 9 years ago.
I was young and stupid.
I didn’t pay it back.
I waited until they closed my account (creditors ‘charge off’ debt all the time. this means that they claim that the money they lost is a ‘capitol loss’ and is claimed on their tax returns)
I waited 7 more years, then the debt came off of my credit report. It is as if nothing happened.
BUT!!!
Here is the catch.
In order to not be liable later for the debt, (which is sold to other companies who then want you to pay them) you have to claim the debt as income on a tax report.
I did this as soon as they charged off the debt.
My credit is fine now. I got a secured credit card 1 year ago and my score went from around 430 (no joke), to a nice 680.
I even have a mortgage and car loan out currently. When the bank who gave me the mortgage pulled my credit, it never showed my past mistakes.
Sweet.
December 3rd, 2007 at 11:18 am
You have to look up your state statue of limitations on debt. Just because it erases from your credit report does not mean it is gone. Never admit or talk to your creditors about the debt they can try to reage your debt if it’s still reporting on your credit.Once the debt is off your credit they canot put it back on your report. If you find that to be the case you write the credit reporting agency that this debt is too old to be reporting for that is against the law.Get yourself a secured credit card and pay that on time or even finace a car . When you show that you pay your debt ontime your score will go up. Also remeber high balances on revolving credit is not a good thing always keep your balances low. I waited till all the big stuff fell off my report and paid off the lower balances on my credit file.
December 4th, 2007 at 7:35 am
I’ll be honest I didn’t read every comment above, so I don’t know if anyone said this but…
As soon as you even CONTACT those companies to find out about negative charges, you re-set that 7-year clock. It’s not 7 years from the ding, or even 7 years from the last payment, but 7 years from the last contact. As soon as you open contact with them again, it’s considered a current debt, and will stay on your report fro another 7 years.
Find out what your state’s laws are though–some states have set that limit at 5 or even 2 years for specific kinds of accounts. But because the standard is 7, some things may still show up on there, and you will have to contact the CREDIT BUREAU (not the company who reported the info) to have it removed.
Incidentally, I’ve never gotten a straight answer regarding what constitutes contacting the company, if it’s indirect–I mean to say, the big question remains whether filing a dispute with the credit bureau where the CREDIT BUREAU contacts them re-sets that 7 year clock.
June 7th, 2008 at 9:07 am
Look pay your debts as best you can but keep on paying them until you have got them cleared. Law / Statute etc. are one thing. The real heart of this is you know you owe money. If I know I owe money and I try to “Get away with it ” in Law or by statute” etc. and I get away with this then I have damaged my own character.
Confront the Credit one at a time. Start with the small one.If the credit itself is wrong find out the true picture.Finding the truth is part of your solution.The truth frees you to make the decision.
Say one small debt is repaid and you have 100 debts so What you say? This is the so what—”you have one small living brick put back into you character” Soon it will become 20 Living bricks.More importantly you’ll have the know how of how to do this for the rest of your life.Trust me when you have 90 living bricks put back into your character you’ll have steele.No one will mess with you again not that people will not try—people will not be able to handle you. Only you will be able to handle you.
Take a look around you. Notice the people that you will not mess with.These people are not unfriendly in fact they are some of the most friendly people you can meet. But guess what they do not run.In particular they pay their debts.They are therefore nor indebted to anyone. No one has any claim on them. Do’nt believe me—– Try and make a claim on them and see what happens.
Always in life son face the dog.Face the debt.Start with the small dog conquer him. Conquer the next one and keep at it until you become like one af these people.
January 18th, 2009 at 3:43 pm
DO NOT repay these debts. If you contact the lenders or inquire about the debts, they will be re-aged, and they won’t fall off for 7 years STARTING FROM TODAY. You’ve already got several years on these debts, and YES, they will fall off after 7 years if you don’t do anything to reactivate them. Get over the moral sense of not paying your debts and let them go. You’ll only hurt yourself if you try to make this right.
July 11th, 2009 at 9:26 pm
Yes, I can sympathize with you. My dad is also a big talker who lies and is starting to put me in a similar boat. It is not your fault that your father promised something and didn’t deliver. He shouldn’t have promised anything if he couldn’t handle it. The whole entire system is unfair and messed up in so many ways. Parents who rush their kids out of the house at a young age can really do some major credit damage to them for a long time and without a degree, its almost impossible to make it on your own working for minimum wage.