Editorial Policy

Missed payments show wisdom of separate cards

Erica Sandberg

August 23, 2016

Q Hi Erica,

When my daughter went to college, I jointly signed for a new credit card for her to make it easy for her to charge her travel expenses and things of that nature. My husband and I would pay off the bill whenever we received one. Well, apparently our bank automatically switched us to paperless billing (or maybe we agreed to the switch and forgot that we did that). The result? The bills stopped coming in the mail, and due to human/tech error, we didn’t get any emails reminding us to pay. Long story short, my daughter tried to purchase something recently, and her card was declined due to late payments. The current balance contains the last thing she charged — train tickets about two months ago. So my question is: Whose credit will get hurt by missed payments, and what’s the damage? — Pat

A Dear Pat,

Whenever there are multiple names on a loan or credit card agreement, everyone listed on that co-signed account will either benefit from positive payment activity or suffer because of negative notations.

The damage to both your and your daughter’s credit reports began when the first delinquency notices were reported to the credit bureaus.

What can you do now? If you believe that the credit card company did something wrong, such as switching you to paperless statements without telling you, call the card issuer and explain what happened. If your lender agrees there was some mistake, the issuer should stop reporting the delinquencies.

Regardless of how your account was switched to paperless statements, as the account owner, you should have been on top of any changes with the account. Yes, confusion can arise when another person is charging and you’re not receiving the statements, but it’s a perfect example of why you should check all shared accounts regularly and independently.

As a general rule, checking your statements once a month is good, but there’s no harm in weekly or even daily reviews. That way, if you spot anything suspicious, you can deal with it right away.

If you and your daughter have to live with the late payments on your credit reports, don’t panic. Though those negative marks will be on your reports for seven years, the credit scoring impact is greatest during the first 24 months. That may still sound terrible, but if you had plenty of positive payment data before the delinquency notices, the sting of the credit dings will be less.

What you do in the future matters, too. If you have other accounts, managing them all perfectly from this point forward will help dilute the damage from the missed payments on your shared account.

Going forward, I recommend that you and your daughter separate your finances.

Start by canceling that co-signed account. To do so, that account should be at a zero balance. Closing an account can lower credit scores temporarily, but if your overall debt is nil or minimal, the drop shouldn’t be significant.

Next, I suggest that your daughter get her own credit card, maybe a student card. If she is under 21, she will need proof of income to get a personal credit card. If she is over 21, listing what she earns (assuming she is working) is fine. She may have to start with a secured card, and there’s nothing wrong with that.

With separate cards, each of you will be responsible for your own charges, checking your statements, paying bills on time, and your credit reports will be reflecting the actions — positive or negative — of the cardholder alone.

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