Secrets About Joint Credit

By , Posted on Apr 22, 2013
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General Budgeting Debt. Saving Money Savings credit card credit cards debthelper.com credit card debt
What is a way to be joined to another person, besides marriage, that keeps you together even if you are apart? 

chained

…Joint Credit.  By signing on the dotted line you have been joined not in marriage but joined in debt.

Just like marriage, how your future will turn out depends a lot on the partner you choose.  If you are going to open a joint account with someone, you must be really careful who you pick.

If the other person disappears you are left responsible for the debt.  Before you decide to fill out that nest credit application, there are a few things you should know about joint credit.

— Firstly —

There is more than one type of shared credit.  Many people talk about “joint” credit but they aren’t always clear on just what that is.  There is three types of shared credit, lenders might have slightly different names for them but they are:

  1. Joint Credit — With joint credit you are a full-fledged partner in this little credit venture.  Your name is on the loan or credit account, and the money or credit is yours to use.  …You are also 100% responsible for the bill.  Nope, not 50%, 100%!
  2. Authorized User — As an authorized user you are allowed to use the credit and usually have a credit card with your name on it, but it is not your account.  You didn’t sign or fill out anything and have no responsibility to pay it off.  You have been given charging privileges by the person who receives the bill.  …If the account owner doesn’t make the payments, some creditors will try to collect from you the amount that you have charged. (They are not usually successful)
  3. Co-Signer — When you are a co-signer, you are signing and saying that you will be responsible for the entire bill.  However, the account will be in someone else’s name and you can’t use it.  The other person will receive the bills and you will have no idea if the account owner is paying on time or defaults until you are denied credit yourself because your credit score has been wrecked or you are contacted by a bill collector.  By being a co-signer, even if the debt is paid on time, you could be affecting your own credit since creditors will include the co-signed debt in your liabilities.

— Secondly —

Joint credit shows up on your individual credit report.

There is no such thing as a joint credit history.  If you and your wife, or whomever, have a joint credit account, the account will show on each of your individual credit reports.  It will more than likely have a designator on the report that shows it is a joint account, but it will always show up on each of your credit reports.  Many people think that because it is “technically” the other person’s credit, that it will not appear on their credit report, they are sadly mistaken.  The positive side of this is if there is a good, well performing account like a credit card with a $10,000 limit and it rarely gets used.  This will help to boost each person’s credit score.  …Similarly, if the account is a mess and maxed out every month, it will hurt the credit score of both of you.

— Thirdly —

Divorce doesn’t get you out of joint credit.  This is something that a lot of people don’t know or understand.  They eventually find out, usually when it’s too late.  No matter what happens in divorce court, both parties are responsible for joint credit. …read it again, No matter what happens in divorce court, both parties are responsible for joint credit!

No matter what happens in divorce court, both parties are responsible for joint credit.

Just because the judge or the divorce decree says one person is responsible for the debt, that doesn’t matter to the creditor.  Both of you are on the loan or credit, so both of you are equally responsible to repay it.  The best thing to do in this type of situation is to pay off and close the debt before the final divorce decree.  Some lenders might allow you to remove one spouse’s name from the account but most will require you to close the account and for one person to apply solely for a new account.

— Lastly —

Know what’s going on. If you have a joint credit account and it is healthy with low balances, decent credit limit and paid off each month, it will help everyone involved.  But if it’s in bad shape, constantly late, making minimum payment and maxed-out, everybody’s credit id going to suffer.

If you have joint accounts it is more important than ever to keep track of what is going on, especially if you are just a co-signer.

Just like in a marriage, it is important to know as much as possible about your partner and be cautious who you choose.  Being joined in debt can be a lifelong commitment.

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