Credit & Money Management
Must I Pay My Son's Credit-Card Debt?
Co-sign with caution. If you're on the application, you're accountable.
By Joan Goldwasser, Senior Reporter
From Kiplinger's Personal Finance magazine, August 2008
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Q. I signed for an MBNA credit card with a $500 limit for my college-bound son. After he graduated, I paid the balance and forgot about the card. Three years later, I was shocked to get a call asking when I was going to pay an $8,000 balance. Can MBNA change the terms of the contract without contacting me? How do I remove this balance from my credit report?
As a rule of thumb, if you signed the application, you are accountable, says Steven Katz, director of consumer education for TransUnion's TrueCredit.com. As a co-applicant, you told the lender that you would accept full responsibility for the debt if your son didn't pay.
MBNA did not need to send you a new contract to raise the credit limit. Most agreements allow the issuer to increase the credit limit. That can work to your benefit because using a smaller percentage of your available credit raises your credit score.
Go online to AnnualCreditReport.com (or call 877-322-8228) for a free copy of your credit report, which will show ownership of the account. If it is jointly held, contact Bank of America, which now issues MBNA cards, and ask the bank to switch the account to your son's name only. If you offer to pay off the entire debt immediately, the bank may agree to make the change, says Emily Davidson, of Credit.com. If it does, ask the credit bureaus to remove the account from your file. If the bank says no, the negative data will remain on your credit report for seven years.
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Reader Comments (3)
Posted by: ClarkS at 07/17/2008 05:02:44 PM
She was shocked to get a call from the collectors? Unless I'm missing something here she should be shocked (and mortified) that her son ran up bills on the increased credit limit, didn't pay and didn't tell her about it!
Posted by: JohnR at 07/18/2008 04:32:22 PM
She should have canceled the card when she paid off the balance at graduation. I do sympathize with her situation though as it apparently never occurred to her that they could quietly increase the joint line of credit and keep her responsible for all of it. Not necessariliy fair IMHO, but ignorance of the law is not an excuse. I would say that a talk with her son about personal responsibility is way overdue!
Posted by: David Wright at 07/18/2008 04:35:18 PM
I have used on online service called Credit Card Debt Reducers. They can help lower your debt without debt consolidation or bankruptcy.