Tag Archives: credit report

Can a Credit Card Debt Be Reported on a Child’s Credit Report?

Real bank or piggy-bank?ASK LEON 

Bankruptcy expert Leon Bayer answers real-life questions.

Dear Leon, 

I got a Chapter 7 discharge about a year ago. Long before filing bankruptcy I got an extra credit card for my daughter to use. At that time the bank assured me that I would be the only person liable for charges on the card. My daughter just got her credit report and the credit card account appears as a charge off. 

How did the company get her social security number? And didn’t it violate the agreement it made with me? My daughter is now 17 years old, and I’m sick over the thought that I ruined her credit. 

Yours truly, 

Marjorie

Dear Marjorie,

I suggest that your daughter dispute the debt on her credit report. It’s not hard to do. You can learn how in Nolo’s article How to Dispute Errors on Your Credit Report.

In her dispute, she should state two things:

  • that the credit card account is not hers, and
  • that even if it was, she is under age 18 and is now voiding the contract, so does not owe the credit card company anything

I think this credit dispute will be quickly resolved in her favor. If it is, that annoying item will disappear from her credit report.

Here is a little background on each of these arguments.

The Credit Card Account Is Not Hers

The credit card company told you that you would be the only one liable for the charges, so the account never belonged to your daughter. Your daughter should state these facts in her dispute.

What If the Agreement Did Hold Your Daughter Liable?

But what if the credit card agreement did hold your daughter liable?  It’s likely you no longer have documents proving the contrary. And credit card companies do issue extra cards to authorized users and hold the user liable. In this case, because the bank has her social security number, is it possible the agreement said she would be liable?

A Minor Can Void a Contract

Even if the credit card agreement did hold your daughter liable for the credit card debt, she can void the contract before she turns 18.

Because the law says that minors lack the capacity to enter into a contract, it gives minors the option to either (1) honor the contract, or (2) void the contract before he or she turns 18.  (There are a few exceptions: Minors cannot void contracts for necessities, like food and shelter.)

Your daughter should immediately notify the credit card company and the credit repair agency that she is voiding the contract.  She can do this by stating:

“While I believe that I never had a contract with [credit card company], if I did, I am now voiding the contract.  I am under the age of 18.”

At that point, since there is no contract in place, your daughter does not owe the credit card company anything, and she can dispute the entry on her credit report.

A Novel Argument?

And if you want to try something new, consider this. Last July, the new Children’s Online Privacy Protection Act Rule (COPPA Rule) took effect in California. If you use the above tactics and still cannot get the item removed, you could hit the credit card company with a demand to remove the item on the ground that it is violating COPPA by publishing information pertaining to the identity of a minor.  It might be a stretch to say that a credit report (which has a limited viewing audience) is “publishing” information about a minor and therefore violating COPPA, but it doesn’t hurt to make the argument. Rather than test new legal waters, perhaps the credit card company (or the credit reporting agency) will back down and remove the item.

-Leon

Leon Bayer is a Los Angeles bankruptcy attorney.  He is a partner at Bayer, Wishman & Leotta, a California law firm specializing in bankruptcy.  The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo.  By answering a question on this blog, Mr. Bayer does not become your lawyer.

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FTC Report: 1 in 4 Credit Reports Have Errors

The FTC recently released figures, based on a years-long, wide-spread study of consumer credit reporting and scoring, that are a wake-up call for American consumers. The study revealed that one in four Americans had errors on their credit reports. About one in ten consumers saw an increase in their credit scores after consumer reporting agencies (CRAs) fixed the errors. About one in twenty consumers had errors severe enough to cause them to pay more for auto loans, insurance, and other credit products.

(Learn more about credit reports and credit scores.)

The FTC Credit Reporting Study

The FTC study began in 2004 with the final report due in 2014. Along the way, the FTC has been reporting results every two years. The study is a first in its magnitude – it includes information from consumers, consumer reporting agencies, lenders, creditors, debt collectors, and the courts. (Read a full report of the FTC study.)

Disputing Errors Can Help

The study also tracked consumer efforts to dispute errors on their reports, and the CRA responses. One in five consumers had an error that was corrected by a CRA. Four out of five consumers who filed disputes had some type of change made to their reports.

One in ten consumers had their score increase after errors were fixed. And one in 20 say and increased score of more than 25 points.

Check Your Credit Report Regularly

According to Howard Shelanski, Director of the FTC’s Bureau of Economics, the study results were, “…eye-opening numbers for American consumers,” and made it clear that “consumers should check their reports regularly.”

To learn how to review your credit report and dispute errors, visit Nolo’s Cleaning Up Your Credit Report topic area.

Paying a Debt Previously Discharged in Bankruptcy

ASK LEON 

Bankruptcy expert Leon Bayer answers real-life questions.

Dear Leon: 

As you may remember, you represented me in a Chapter 7 bankruptcy some time ago. I am now back on my feet and would like to pay a balance that I owed to my dentist prior to my bankruptcy. I included this debt in my bankruptcy, and it was discharged. 

Once I pay the debt off, is there some way to include in my bankruptcy records that I paid the balance or that it was satisfied post-bankruptcy?  Also, I’d like this to be reported on my credit report.

— Stephen

Dear Stephen:

It’s good to hear from you, and yours is a good question. Here’s my two-part answer.

You Cannot Record the Payment in Your Prior Bankruptcy

Your bankruptcy court papers contain a record of the debts you owed on the date you filed bankruptcy. Whatever payments you make after the bankruptcy is not a function of your case. There is no procedure for reporting the payment of this debt to the bankruptcy court.

Your Dentist Bill and Your Credit Report

Not all creditors report payment information to the credit reporting agencies. Generally, only financial institutions and debt collectors report debt payments. Your credit report will also usually include debts reflected in public records, such as court judgments and tax liens.

Many businesses don’t want to waste the time or money (or risk potential liability of incorrect reporting) to report to credit bureaus. As a result, it’s extremely unlikely that your delinquent dentist bill appeared on your credit report.

If, however, your dentist sued you and got a judgment for the debt, that judgment will appear on your credit report for 10 years. But your report must also reflect that the debt was “discharged in bankruptcy” and that the current balance due is $0.

(To learn more about what information appears on your credit report and how long negative items can be reported, see Nolo’s Credit Reports & Credit Scores area.)

Should You Pay Your Dentist?

The bankruptcy law specifically says that you can still pay any debt, if you want to. From your question, it sounds like you have decided to pay the dentist, but have not yet done so?

Good reasons to pay your dentist are because the dentist did a great job for you, and perhaps you would like to return there. A bad reason is because you think it might improve your credit rating — the payment of a discharged debt will not do that.

-Leon

Leon Bayer is a Los Angeles bankruptcy attorney.  He is a partner at Bayer, Wishman & Leotta, a California law firm specializing in bankruptcy.  The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo.  By answering a question on this blog, Mr. Bayer does not become your lawyer.

Find Leon on Google+

 

Reaffirming a Car Loan & Your Credit

ASK LEON 

Bankruptcy expert Leon Bayer answers real-life questions.

Dear Mr. Bayer,

I filed for Chapter 7 bankruptcy last year. I did not include my car loan in the bankruptcy, but have stayed current on my car loan payments. My credit report now says that the car loan was included in the bankruptcy. I want to use my car loan payment status to rebuild my credit (I’ve never been late on a payment). Is there any way I can get the “included in bankruptcy” status removed from the credit report so that instead my credit report reflects my current payments?

— Steven

Dear Steven,

You are correct that a notation on your credit report saying  “car loan – current” certainly would help your credit score. However, in order for your car loan to appear that way on your report, you would have had to “reaffirm” your car loan in your Chapter 7 bankruptcy case. At this point, since you’ve already received your bankruptcy discharge, it’s probably too late to get the car loan reaffirmed. (To learn what happens to your car and loan in Chapter 7, see Your Car in Chapter 7 Bankruptcy.)

Years ago I had some luck reopening a bankruptcy case and vacating the discharge so that a reaffirmation could be filed with the court, but I have not tried it yet under the more complex “new” bankruptcy law. Also, the attorney fees to hire a good lawyer for such work would probably be very expensive.

Is your loan balance upside down? That is, do you owe more on the loan than the car is currently worth? Most car loans that I see are  upside down. If yours is upside down, it was probably a good decision not to reaffirm the loan anyway. (For example, why obligate yourself on a $20,000 car loan for a car worth only $10,000?)

Keep in mind that if there was no valid reaffirmation of the car loan, you can turn the car in and you will not be liable for any deficiency balance for the loan.  (Learn the definition of deficiency balance.)

Perhaps you could finance a new or used car and rebuild your credit that way? It’s not as hard as you think to get financing for a car during or right after bankruptcy.

— Leon

Next up: Ways to Finance a Car During or After Bankruptcy

Guest blogger Leon Bayer practices bankruptcy law in Los Angeles, California.  He is a partner at Bayer, Wishman & Leotta.  The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo.  By answering a question on this blog, Mr. Bayer does not become your lawyer.

How Long Bankruptcy Remains on Your Credit Report

ASK LEON 

Bankruptcy expert Leon Bayer answers real-life questions.

Dear Leon,

We declared bankruptcy in Kentucky in February 2005 and our debts were discharged that summer, prior to the new bankruptcy laws of October 2005. Will the bankruptcy still remain on our credit report for ten years?  

Regards,

Bruce

Dear Bruce,

Credit reporting information is not covered under bankruptcy law, so  it makes no difference that your case was filed before the bankruptcy laws changed in 2005.  How long information remains on your  credit report is governed by the Fair Credit Reporting Act (FCRA). The FCRA allows credit bureaus (also called credit reporting agencies) to list bankruptcies on your credit report for ten years. (To learn how long other types of negative information can remain on your credit report, see Nolo’s Credit Repair area.)

The various bureaus will report a person’s bankruptcy for the maximum ten years,  because their customers want it that way. The “customers” of a credit bureau are financial institutions, not consumers. Credit bureaus sell credit reports to financial institutions, who pay them a fee for the information.  A credit report is the product that a credit bureaus sells to subscribers, (just like a newspaper sells papers), and that is how each bureau makes money.

Again, think about a newspaper. If a certain newspaper has a reputation for printing unreliable information, it won’t stay in business very long. Likewise, if a credit bureau relaxed it’s reporting standards, financial institutions would not trust the information in those reports, and would start getting the information elsewhere.

– Leon

Guest blogger Leon Bayer practices bankruptcy law in Los Angeles, California.  He is a partner at Bayer, Wishman & Leotta.  

The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo.  By answering a question on this blog, Mr. Bayer does not become your lawyer.