If My Spouse Files Bankruptcy & I Am an Authorized User on a Credit Card Does it Hurt My Credit?

Authorized users of credit cards can reap some of the fallout of the cardholder's financial troubles. Fortunately, there are ways to protect your credit, even if your spouse files for bankruptcy.

Authorized User

An authorized user of a credit card is allowed to use the card, but is not responsible for paying the charges. Being an authorized user is different than being a joint account holder, who is equally responsible for any debts incurred.

Credit Reporting

If the primary cardholder doesn't make the minimum payments due on the account, or files for bankruptcy, this information may end up on the authorized user's credit report. This can seriously damage the authorized user's credit score.

Prevention/Solution

Contact the credit card companies and ask to have your name removed from your spouse's accounts as an authorized user. You can also ask the credit bureaus to remove any derogatory information related to the account from your credit report.

Community Property States

In a community property state, spouses share responsibility for marital debts and assets. Spouses of account holders may be held responsible for a credit card debt, even if the spouse was just an authorized user of the card.

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Does Paying Off Charged-Off Accounts Bring Up Credit Scores?

So you were a little -- or very -- irresponsible with your credit in the past. Now, your credit report is littered with charged-off accounts and your credit score's in the trash. Don't wait seven years for those charged-off accounts to drop off your credit report, but don't get in too big a hurry to pay them off, either. While paying off charged-off accounts won't hurt your credit, it won't improve your credit score, either.

Charged-Off Accounts

A charged-off debt is, by definition, a debt that is 120 to 180 days past due. However, for consumers, the term "charged-off" can be misleading. While to the financial world, a charged-off account is one that auditors or accountants have told a creditor to take off the books, because, due to a lack of payments on the debt, it appears that the debt is unrecoverable, to consumers, there is often the assumption that charged-off debt is debt no longer owed. That is not the case. You still owe the debt, but the creditor has accepted the fact that getting payment won't be easy.

How Charge-Offs Affect Credit Scores

There's nothing that brings down a credit score more than paying debts late or not at all. Therefore, by the time a debt is charged off, the damage is done to your credit report; the charge-off is, in a sense, the final blow. The number of charge-offs versus current accounts often affects your credit score more than the charged-off accounts alone. If, for instance, you have four credit accounts, and one is reported as a charge-off, while the others are in good standing, the damage is less than having four accounts, all of which have been charged off.

Paying Off Charged-Off Accounts

Paying off charged-off accounts won't improve your credit score overnight, but it may help you plead your case with potential lenders. "From a credit scoring standpoint, there is not a big difference between a paid or unpaid charge-off," writes Bankrate's Steve Bucci. "However, from the point of view of a lender considering you for a loan or an employer reviewing your credit report as part of the hiring or promotion process, accounts listed as paid can make a big difference."

Using Other Accounts to Make Improvements

If your credit score is trashed due to multiple charge-offs, by all means pay off the charge-offs as you are financially able, but do not rely on paying these debts to improve your credit score. Rather, diminish the effect these old debts have on your credit by creating a better credit history. Pay bills in full, on time. Pay down high credit card balances, and open new accounts sparingly. Given time, your credit score will improve, and those charge-offs will become ancient credit history.

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Does a Credit Check Show Previous Jobs?

Credit checks are checks of any individual's credit report run by parties other than the individual himself. Credit checks may be run by a number of different entities, including lenders, creditors, landlords and employers. The information culled from this credit check, although only related to the person's lending history, may influence decisions about extending the individual credit or another privilege involving trust, such as an apartment or a job. Credit reports do not show previous jobs.

Contents of Credit Reports

Credit reports only show information directly related to a person's lending history. A credit report will list all loans that the person has taken out in the last decade or so, as well as the disposition of these loans, such as whether the person paid them off on time or was late. Because a person's previous employment is not directly related to his credit history, a list of previous employers does not show up on the credit check.

"Soft" Checks

Every time an organization other than a lender checks on a person's credit report, this check is recorded on the credit report itself. Therefore, a check of the credit report can reveal who else has checked the report recently. Many employers choose to run credit checks on employees before hiring them. So, a check of a person's credit report might reveal some of the employers to which the individual applied, but not whether he was hired or not.

Background Checks

Many employers run additional background checks on employees, in addition or in lieu of credit checks. These background checks can take many forms, from a cursory examination of public records to detailed interviews with the candidate's family and friends. While a credit check won't show what jobs an individual has previously held, there are many ways in which a background check can reveal this information. For example, a company conducting such a check might the employers listed on a candidate's resume to make sure the information is accurate.

Considerations

The only way that a person's previous employers could show up on their credit report was if he somehow owed them money. While owing money to a former employer would be strange, it could certainly happen. In such a case, the employer would be listed as a creditor in the report and the relationship between the individual and the employer---the fact that the individual used to work for the employer---would not be revealed.

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How to Improve My Credit Status

Your credit status affects your chances of getting loans, opening new credit lines and applying for anything related to a credit score. A poor credit status leads to a person being deemed as a risky borrower, which decreases their chances of being approved for anything credit related. However, even with poor credit, you can improve your credit status by changing a few credit-related habits. Improving your credit status takes time and patience, but it is certainly possible.

Instructions

1

Pay credit card bills on time. Making late payments on credit card bills negatively affects your credit score.

2

Pay down your credit card balances. Each credit card, as well as your total credit line, should be below 25 percent usage to increase your credit score. Charge only $750 or below on a $3,000 limit card, for example. Pay down all credit cards that carry balances above the 25 percent mark and your credit score will increase.

3

Get rid of credit cards whose issuers don't report your credit limit. Issuers who don't report card limits normally use your highest balance as your limit. This makes it appear that your card is maxed out, which adversely affects your credit rating. Call your credit card issuer to ensure that they report your credit limit.

4

Open new credit accounts slowly. New credit accounts lower the average length of your credit history, which affects your credit score. If possible, avoid opening new credit accounts and just hang onto your old ones.

5

Dispute any incorrect charges. Credit card companies make mistakes, and if you see an incorrect debt on your credit card bill, then contact the credit card company and dispute the charge. Write a simple letter asking for verification of the debt, and credit card companies will double check to make sure no mistakes were made.

6

Transfer balances from near maxed out cards to other cards. This allows for a more balanced credit usage, which raises your credit rating. Most cards allow the transfer of balances.

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How Can I Clear My Credit Up?

A low credit score has a negative effect on your buying power. Even if you qualify for a new loan or credit card, the interest rates and fees the lender charges are often much higher if a poor credit rating makes you a lending risk. While you cannot always clear away adverse information within your credit file before the reporting period on the data expires, you can take action to clear up certain aspects of your report and, in doing so, improve your credit score.

Correct Credit Errors

The information on your credit report was reported to the credit bureaus by your lenders and creditors. If a lender has inaccurate information, it will make an inaccurate report to the bureaus. Upon reviewing their credit records, some consumers even uncover derogatory accounts that belong to other individuals.

The Fair Credit Reporting Act (FCRA) provides you with the ability to request one free copy of your credit report each year. If you find errors within your report, notify both the information provider and each credit bureau of the errors in order to have them promptly rectified. Correcting inaccurate information -- especially if the information is derogatory -- can boost your credit rating.

Send Goodwill Letters

Missed payment notations within your credit history suggest to future lenders that you are a high lending risk. In addition, missed payments severely damage your credit rating. A goodwill letter is a simple written request to the creditor that it amend the negative notation within your file as a gesture of goodwill. Not all lenders acknowledge goodwill letters. Your chances of successfully clearing away negative information with a goodwill letter increase if the late payment in question was an isolated incident or you have held the account for a long period of time.

Dispute Obsolete Entries

The FCRA notes that each entry on your credit report can only remain for a fixed amount of time. Unfortunately, sometimes damaging records linger on consumer credit reports for longer than the legal time frame. Most negative entries, such as late payments, charge-offs and collection accounts, remain for seven years. Exceptions to this rule include bankruptcies, which report for ten years, and tax liens, which report indefinitely until you pay them off.

If you discover obsolete information within your credit history, you can dispute the obsolete data with the credit bureaus in the same manner that you would dispute incorrect information. The FCRA requires the credit bureaus to remove obsolete entries.

Practice Responsible Habits

Clearing up bad credit is not an overnight process. To truly remedy a damaged credit rating, you must practice responsible debt management skills, pay your creditors on time and keep your outstanding debts as low as possible. Because federal law places limits on how long each item can linger within your credit records, practicing responsible habits ensures that your credit rating will naturally increase over time as evidence of your past mistakes disappear, only to be replaced with positive information.

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How Can I Get an Outstanding Credit Report or Score?

Your credit score is one of the things that could make or break you when trying to get a loan, buy a house, lease a car, apply for credit cards, rent an apartment or almost any other major purchase. Once your credit score falls behind, it's not impossible to rescue it, but it will take some time. Depending on how bad your credit score is, it could take years of positive activity before it is restored to an outstanding state. The best path to an outstanding credit score is to keep up and never fall too far behind.

Instructions

1

Pay your bills on time. If you have a credit balance that has to be paid off--loan payments, bank fees, rent or any other obligation--you have to pay them. In most cases, you don't have to pay them in full, but you will have to make some sort of payment. Making a minimum payment will show your lenders that you are making an attempt to pay off your bills. If you make no payment, your credit will get reported to the credit bureau within 30 days. Some companies wait 60 days and others may even wait 90 days. You will have to double check before you want to take a chance. Your best bet is to make a payment before it is 30 days overdue.

2

Buy stuff using credit. The only way to build your credit up is by using it. If you have a credit card, make a plan to buy everything on your credit card, but make sure you have the cash to pay it back at the end of the month. Whatever you would buy in cash, just buy it on your credit card and pay it in full at the end of the month. This will show creditors that you're using a lot of credit, but you can pay it in full when you have to. Eventually, your credit limit will raise and your credit score will go up. Every line of credit you open up can help you build your credit. You just have to make sure you make your payments on time. Once you start making payments well past due, you credit score will go down. Don't open up more lines of credit than you can handle.

3

Don't apply for additional lines of credit if you think you'll be denied. The more times you apply for a credit card or a loan, the lower your credit score can become. Three or four applications is the norm, but once you get up to eight or more applications, your credit score is at risk. Creditors can see how many times you've tried to get credit and denied, and this will eventually hurt you. If you really need some credit, check your credit score before you apply. If your score is above 620, you will likely be able to get most loans and credit cards. If you're below 620, and even more, like below 580, you will get denied by most firms. You will need at least six months of solid activity to build your score back up.

4

Open a checking account. Having a bank account in positive standing for at least six months is a sign of stability for lenders and will help build your credit up. Don't overdraft or bounce checks. If you do, pay them back immediately. Writing good checks, making deposits and withdrawals all help you establish your credit. But remember, none of this will transfer to your credit score overnight. It takes months of excellent standing to get an outstanding credit score.

5

Open department store credit cards. If you frequently visit a couple of stores, look into their credit cards. Having more credit cards will help you have better credit as long as you pay everything on time and don't open up too many.

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What Does R1 Mean on a Credit Report?

A credit report contains a record of your financial accounts and shows how you have maintained those accounts. A credit report contains codes and digits that have meaning. Without knowing what the codes mean, you may have a difficult time reading the credit report.

Why are There Codes?

A credit report contains a large amount of information. All of your financial accounts that have been reported for the previous seven plus years will appear. For each financial account the name of the creditor, balance, high balance, payment amount, type of account, payment history and more is recorded. By using codes, it reduces the amount of text needed.

I Codes

The letter "I" refers to an installment loan.

Any loan that is an installment loan will be marked by an "I." An installment loan is a loan with a fixed payment amount over a fixed number of years such as a mortgage or a car loan.

R Codes

The letter "R" indicates a revolving account.

R codes are used to identify revolving credit. Revolving credit is a type of credit where you have a credit limit and can reduce the balance and charge it back up. A credit card is an example of revolving credit.

Number codes

Along with the R or I code on the credit report you will find a 1 to 9. While it is rare to see a 5, 6, 7 or 8, the codes 1, 2, 3, 4 and 9 are commonly seen. A 1 indicates the payments are made on time. A 2 indicates a payment has been 30 days late. A 3 rating indicates the account has had a 60 day late payment and a 4 indicates the account has had a payment later than 90 days. A 9 -- the worst rating, shows the account has been charged off or referred to collections.

R1 Code

By reading the above information, you can gather that an R1 is a revolving account that has been paid on time.

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