Home > Credit 101 > 4 Ways You Can Wreck Somebody Else’s Credit

Comments 0 Comments

Nothing can sour a relationship faster than abusing trust — and when it comes to credit, it can happen by accident. A friend does you a favor, and then what should have been your problem somehow becomes theirs.

Damaging someone else’s credit is easier to do than you might think, and repairing trust can be difficult — and undoing the accidental credit damage all but impossible.  Here are four ways you can hurt someone else’s credit.

1. Getting a Ticket While Using a Friend’s Car

A Credit.com reader recently told us how he borrowed a car from a friend, got a parking ticket, neglected to pay it … and it was sent to collections. His mistake, but his credit didn’t suffer for it.

But his friend’s did. It resulted in a collection account on the car owner’s credit reports. And a collection item is a giant problem — it could keep his friend from getting a mortgage or result in a higher interest rates if he is able to get one approved. Add to that the fact that some insurance rates are also tied to credit scores, and you have a problem. (Parents of young adults take note: Unpaid parking tickets have derailed refinances when would-be borrowers discover their credit scores are much lower than they thought because of a collections or judgment they knew nothing about. So, yes, even though you were unaware of the beach trip your adult child took, your credit could take a hit.)

2. Failing to Repay a Co-Signed Loan

Whether it’s a student loan, car loan or an apartment lease, when someone co-signs for you, they are agreeing to pay the whole debt if you don’t. And it seems reasonable to assume that if you were the primary borrower, both you and they expect you to pay. If you are going to be late with a payment, let your co-signer know. He or she may decide to make that payment for you rather than suffer the consequences to their credit scores (or have fees and penalties added to the amount owed). If the loan is written off, it will hurt your co-signers’ credit. They may also get the dreaded 1099-C and may owe taxes on the amount of the unpaid loan.

3. Borrowing a Library Card & Never Returning the Book

Though the rules are scheduled to change on this, as of now, if you borrow a friend’s library card or book and forgot or neglected to return the book on time, they may end up with a balance that could wind up in collections. Even if you are married to the person the library thinks owes the overdue fines, if they are sent to collections, that big negative goes on his or her credit reports, not yours.

4. Abuse Privileges as an Authorized User

If you are an authorized user on someone else’s credit card, be sure you are clear on what expectations are on how much you can charge, and when. Credit scores take into consideration the amount of debt relative to the credit limit on the card. It’s important to keep the balance to less than 30% of the limit, and it’s best to keep it to less than 10%, particularly if you are looking to build your score.

If you’ve been the recipient of a friend’s trust in the ways outlined above, it’s important to realize that even seemingly little oversights (the library book that slid way into a dark corner of the trunk) can have big consequences. As irritating as it can be when you have only yourself to blame for a credit misstep — and we all make them from time to time — it can feel even worse when someone else has to face the consequences.

And if you’re the friend who’s co-signing and letting others use your cards, first we can’t caution you strongly enough on the co-signing. If you do it, see if you can get access to the account so that you can check to see that payments are being made on time. It’s also smart to check your credit regularly (you can get a free credit report summary, updated every 14 days, from Credit.com). That can let you know early that something is amiss — whether it’s a friend’s misstep or fraud — and allow you to address it quickly and limit the damage.

More on Credit Reports & Credit Scores:

Image: Photodisc

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team