Ask The DebtBuster: Summer 2004
By Mike Schiano
Q: I have messed up on paying my bills in the past, but now I am enrolled in a debt counseling program and paying my bills on time. I kept one credit card out of the debt program that I pay on time every month. What else can I do to raise my credit score?
DebtBuster: The best way to repair damaged credit is to make on-time payments, in the amount the creditors expect as a minimum, for the next 12 to 24 months. It sounds like you are off to a good start at that important task. As you pay down debt and lower your debt-to-income ratio, your score should begin to rise as long as you do not take on additional debts or miss any payments.
I am concerned about the credit card you kept out of the credit counseling program. I urge you to avoid using it for personal purchases, because the last thing you need is more debt. However, it may be acceptable to use the card only for reimbursable business expenses.
Be sure to check all three of your credit reports to make sure they do not contain any incorrect or outdated information. Negative information except bankruptcy stays on your report for seven years; anything older should be removed. A bankruptcy, by the way, stays on the report for 10 years. Be proactive in making sure that your credit reports reflect the most current and correct information. At least that gives you a chance to improve your score.
Q: I have been in a five-year relationship and, during the past two years, I have allowed my boyfriend to use my credit. We have one jointly owned credit card - with a substantial balance he ran up - but I am the primary cardholder. I have three other cards and I allowed him to transfer his numerous other debts to these cards, thinking we would be together forever. He paid the minimum every month, but now we are going our separate ways and I am desperate to get this huge debt off my credit. Is there any way he can be made to assume this debt?
DebtBuster: Unless there is a way to transfer the balances from your credit accounts onto credit card accounts that belong to your ex, it is going to be difficult for you to escape responsibility for repaying all of the debts. In the meantime, I hope he is at least willing to be responsible by paying you a sufficient amount each month so you can make the payments to your accounts without falling behind and damaging your credit further.
I urge you to contact your bank and all of your creditors to inform them that your ex should have absolutely no access to any of your accounts and personal information. Change your account numbers, PIN numbers, passwords and other access codes that he might have used during your relationship.
Obtain copies of your credit reports to make sure the information is accurate and up to date. As nice as he might seem in helping you repay the debts, keep an eye on your credit reports for a long time to make sure he does not use your identity to open more credit for his use.
A credit counseling program may prove helpful in repaying the debts, but you would need to enroll personally into the program since the debt balances are on your credit cards. That means your creditors will inactivate your accounts. If the boyfriend's credit is damaged, he probably would not qualify for a loan to cover the debts.
Linda Barbanel, author of "Sex, Money and Power," believes that simply talking to each other early and often about money helps avoid big problems along the way. "Trying to understand each other's behavior and opinions about money, rather than being judgmental, you'll create financial harmony," she says. "Strive to find middle ground and look for alternatives that work for both of you... Even if your money styles vary wildly, there's hope."
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Mike Schiano hosts a nationally syndicated radio show about personal finance and is the author of "Spend Your Way to Wealth." Listen for Mike on "Military Money Minutes" on Armed Forces Radio Network. Visit Mike at InChargeRadio.com or send e-mail to mike@mikeshow.com.