A daughter's bad credit record can't be kissed and made better

Dollars & Sense

December 14, 2003|By Liz Pulliam Weston | Liz Pulliam Weston,SPECIAL TO THE L.A. TIMES

One of my children was extremely delinquent in paying several credit cards. These cards are now paid off. A representative of one of the credit bureaus told me that these delinquencies would continue to show on her credit report for the next seven to 10 years, but that for $198 plus $12 shipping and handling, the credit report could be cleared within 30 days. A refund of the money she pays is guaranteed within that time period.

Is this a valid offer or a scam?

Of course it's a scam.

Just think about the logic behind this "offer." Lenders use credit reports to evaluate applicants' creditworthiness. Lenders look at a person's history of paying debts on time, current obligations and the ratio of credit being used to determine how likely he or she is to repay a new loan.

If everyone could get true, negative information removed from their credit reports for $210, what good would the resulting artificially sanitized reports be to lenders? There would be no telling who's a good risk and who's not. The credit bureaus that provide the reports would be out of business in a matter of days.

That should have tipped you off that you weren't talking to a legitimate representative of a credit bureau. One would hope that a real credit bureau employee also would know that negative credit information is dropped after seven years. The exception is bankruptcy, which can be reported for 10 years.

And that's appropriate. Lenders need to know that your child was irresponsible about her debts. That allows them to charge her more for any credit she does get and to charge responsible borrowers less. People who pay their bills on time shouldn't be saddled with the costs of those who can't be bothered.

In any case, your daughter can begin to rehabilitate her credit immediately. She can do that by not missing any more payments, not charging more than she can pay off in a month, not applying for credit she doesn't need and not maxing out her cards. Within a few years, the effects of her old bad behavior should be significantly lessened.

The chances of her actually doing that may depend on whether she learned her lesson this time. The phrase you used - "These cards are now paid off," rather than "She has now paid these cards off" - indicates that you may have bailed her out.

Some spendthrift children do reform after parental intervention, but many never learn without the pain of having to dig themselves out of their own holes.

My fiance and I are planning to be married in the next few months. I have an old tax debt that I incurred as an independent contractor several years ago, and I want to make sure that he is not going to be held liable for this bill once we are married.

Should we file our taxes as "married, filing separately" so that his refund won't get taken to pay off my old tax debt?

For most couples, filing separately is a bad idea. In your case, however, it may be the smartest course.

Before taking any portion of a refund to pay old tax debt, the Internal Revenue Service is supposed to look at who "earned" the refund. Only the portion attributable to the spouse with the tax debt is supposed to be fair game, said tax expert Mark Luscombe, principal analyst at CCH Inc.

The rules for determining how to attribute the money, however, can be confusing, and you may be saddled with the burden of proving that the refund isn't owed to you. In community property states, a refund often is considered the equal property of both spouses, meaning that his money could well be taken to pay your tax debt.

Luscombe's advice? Talk this over with a tax professional who can evaluate your situation. The pro also could help get you on a repayment plan with the IRS, if you're not on one already.

"Since there will be some other tax costs associated with 'married, filing separately' compared to joint filing," Luscombe said, the tax professional can help "make sure you choose the option best for you."

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