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Your ex-Spouse Could Be Ruining Your Credit
With joint credit card accounts, one person is the primary account holder-but on most credit card agreements, the fine print holds you both accountable and your credit rating will be judged accordingly. If you're not the primary account holder, protecting yourself against your ex-spouse making further charges is critical. The account stays open as long as there is an outstanding balance on such accounts.
Step 1-Get those balances paid down as soon as possible.
Step 2-Write a letter to the bank or credit card issuing company explaining that you will not be responsible for any new charges made to the joint account as of the date of your letter. Mail the letter certified, signature required, save the mailing receipt with a copy of your letter for future reference. Don't expect a phone call or email to work for you in this situation.
Step 3-Get a copy of your credit report, (see how in our free credit card reports news article) review it thoroughly to ensure there are no red flags. If you discover any strikes against you, dispute these errors with the bank or issuer immediately and reference the letter you sent them. You may learn of credit card accounts your spouse opened without you ever knowing it.
Step 4-After reviewing your credit report, you should apply for one credit card solely in your name, just one credit card, because applying for a lot of credit cards could cause you to be perceived as someone who is financially strapped and desperate for credit. Timely payments to this new account will start you on your way to re-building what could be a damaged credit card rating. It will take some time to re-build your credit history-we recommend a low interest credit card that will get you back on track: Over 2 million customers use The Orchard Bank Credit Card to help them establish blish or re-establish their credit. Our Card offers great customer service, modest fees and periodic credit limit increase reviews. Our Orchard Bank MasterCard reports to all 3 Credit Bureaus every month which is key in re-building your credit card ratings. If you need further help with low interest credit cards click on Live Credit Card Help link above Monday-Friday 9am-5pm EST for a free low interest credit card or secured credit card consultation.
Credit Cards and Divorce Example:
Mary and Bill recently divorced. Their divorce decree stated that Bill would pay the balances on their three joint credit card accounts. Months later, after Bill neglected to pay off these accounts, all three creditors contacted Mary for payment. She referred them to the divorce decree, insisting that she was not responsible for the accounts. The creditors correctly stated that they were not parties to the decree and that Mary was still legally responsible for paying off the couple's joint accounts. Mary later found out that the late payments appeared on her credit report.
If you've recently been through a divorce-or are contemplating one-you may want to look closely at issues involving credit. Understanding the different kinds of credit accounts opened during a marriage may help illuminate the potential benefits-and pitfalls-of each.
There are two types of credit accounts: individual and joint. You can permit authorized persons to use the account with either. When you apply for credit-whether a charge card or a mortgage loan-you'll be asked to select one type.
Individual or Joint Account
Individual Account: Your income, assets, and credit history are considered by the creditor. Whether you are married or single, you alone are responsible for paying off the debt. The account will appear on your credit report, and may appear on the credit report of any "authorized" user. However, if you live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin), you and your spouse may be responsible for debts incurred during the marriage, and the individual debts of one spouse may appear on the credit report of the other.
Advantages/Disadvantages: If you're not employed outside the home, work part-time, or have a low-paying job, it may be difficult to demonstrate a strong financial picture without your spouse's income. But if you open an account in your name and are responsible, no one can negatively affect your credit record.
Joint Account: Your income, financial assets, and credit history-and your spouse's-are considerations for a joint account. No matter who handles the household bills, you and your spouse are responsible for seeing that debts are paid. A creditor who reports the credit history of a joint account to credit bureaus must report it in both names (if the account was opened after June 1, 1977).
Advantages/Disadvantages: An application combining the financial resources of two people may present a stronger case to a creditor who is granting a loan or credit card. But because two people applied together for the credit, each is responsible for the debt. This is true even if a divorce decree assigns separate debt obligations to each spouse. Former spouses who run up bills and don't pay them can hurt their ex-partner's credit histories on jointly-held accounts.
Account "Users"
If you open an individual account, you may authorize another person to use it. If you name your spouse as the authorized user, a creditor who reports the credit history to a credit bureau must report it in your spouse's name as well as in your's (if the account was opened after June 1, 1977). A creditor also may report the credit history in the name of any other authorized user.
Advantages/Disadvantages: User accounts often are opened for convenience. They benefit people who might not qualify for credit on their own, such as students or homemakers. While these people may use the account, you-not they-are contractually liable for paying the debt.
If You Divorce
If you're considering divorce or separation, pay special attention to the status of your credit accounts. If you maintain joint accounts during this time, it's important to make regular payments so your credit record won't suffer. As long as there's an outstanding balance on a joint account, you and your spouse are responsible for it.
If you divorce, you may want to close joint accounts or accounts in which your former spouse was an authorized user. Or ask the creditor to convert these accounts to individual accounts.
By law, a creditor cannot close a joint account because of a change in marital status, but can do so at the request of either spouse. A creditor, however, does not have to change joint accounts to individual accounts. The creditor can require you to reapply for credit on an individual basis and then, based on your new application, extend or deny you credit. In the case of a mortgage or home equity loan, a lender is likely to require refinancing to remove a spouse from the obligation.
Out of Work? How to Deal with Creditors
It's become an all-too-familiar headline and lead story-job cuts, dot.com failures, corporate restructuring and lay-offs.If you've recently lost your job, your first thoughts may be, "how will I make ends meet." Money matters are a source of stress and frustration for many people. The Federal Trade Commission (FTC) publishes free brochures spelling out your rights when it comes to fair debt collection and credit reporting practices.
Fair Debt Collection
If you find that you can't pay your bills on time, contact your creditors immediately. Try to work out a modified payment plan that reduces your payments to a more manageable level. Don't wait until your accounts have been turned over to a debt collector. At that point, your creditors have given up on you. The federal Fair Debt Collection Practices Act requires debt collectors to treat you fairly by prohibiting certain methods of debt collection. To learn more, call the FTC's Consumer Response Center for a free copy of Fair Debt Collection, or visit www.ftc.gov.
Fair Credit Reporting
Non-payment and late payments may affect your credit rating and your ability to get credit in the future. Although creditors usually consider a number of factors in deciding whether to grant credit, most creditors rely heavily on your credit history. That's one reason it's important to make sure your credit report is accurate. For example, if your file showed that you were once late in making payments, but didn't show that you are no longer delinquent, it would be inaccurate. The credit reporting agency must show that your payments now are current.
Negative Credit Can Put a Squeeze on your Job Search
Bad credit can affect your ability to get more credit. Did you know it also can affect your ability the get or keep a job? Employers often use a credit report when they hire and evaluate employees for promotion, reassignment or retention.
According to the Fair Credit Reporting Act (FCRA), which is enforced by the Federal Trade Commission (FTC) and your state Attorney General, an employer must get your permission to look at your credit report. If you don't get a job because of information in your report, the employer must give you written instructions on how to challenge the accuracy of the information in your report. Accurate negative information can stay on your report for seven years; bankruptcy may be reported for 10 years.
Check your credit report for free. See our other credit card news articles to find out how.
According the FCRA, both the credit reporting agency and the organization that provided the information-such as your bank or credit card company-are responsible for correcting inaccurate or incomplete information in your report. To protect your rights under the law, contact both the credit reporting agency and the information provider to dispute any information.
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