My brother is an entrepreneur with multiple business ventures. A couple years ago, I helped him out with one of his projects and agreed to co-sign two business credit cards for the venture because my credit is better than his. Since then, I’ve gone back to devoting myself full-time to my day job, but my name’s still on the cards. When I recently pulled my credit reports, I was shocked by the number of late payments on one of the cards. I’ve confronted my brother and am getting my name off both of them. But what else can I do to recover my credit? Would it make a difference if I wrote to the credit reporting agencies and explained that those weren’t my charges? — Craig
I’ve noticed that the term “business card” is bandied about rather loosely. While your brother may have needed a line of credit to kick-start his venture, the card you helped him get was probably like any old unsecured credit card — at least as far as payment and legal responsibility is concerned. Accounts established for small businesses usually just mean that they allow cardholders to do things like rack up extra points at certain retailers, such as office supply stores, provide their employees with supplementary cards with controllable credit limits or enjoy extended grace periods on purchases.
Returning to your situation, the spotty payments your brother made is showing up on both his and your credit reports and there’s not much you can do about it. You are a co-signer, so his, as well as your, charging history will be evident on all cardholders’ reports. Consumer credit reporting agencies are bound to list accurate and timely data, so asking them to remove the evidence will be for naught. As with most derogatory information, the late payment notations will remain for a total of seven years.
Be aware, too, that if your brother lets the debt slide deep into delinquency, the creditor has the right to take the matter to court. You could be held equally liable for the balance due, even if you never charged a penny. Again, when you co-signed, you promised that you will cover the obligation in the event your brother doesn’t.
To mitigate further damage, I agree that closing all accounts you and you brother are connected to is a sensible idea. It was kind of you to help him out, but clearly his poor credit management skills has caused you harm. It doesn’t say much for his business acumen either. Do know, though, that to close a card with an outstanding debt — co-signed or not — most creditors require a balance to be at zero first.
You may also consider writing a brief statement of explanation and attach it to your three credit files. This will allow you to tell your side of the story. Your tale of brotherly woe won’t make a difference to your FICO or other credit scores, but if someone were to pull it and read what you wrote, they may be positively influenced by your story.
Regarding your credit score, it’s usually best to leave old, active accounts alone. However, because the history with one of the cards has been so bad, it’s more of a liability than an asset. If you have other individual accounts that you’ve owned for many years, canceling the one with late payments as well as the other should have little effect on those numbers.
Your credit rating will bounce back by letting time heal the wounds that your brother inflicted and by borrowing and repaying perfectly on your own from this point forward.
And, in the future, don’t co-sign on anyone’s cards again, business or personal. Be there for your friends and relatives in less risky, more productive ways.