Am I responsible if someone opened a credit card in my name?
If any debt is opened in your name, you are responsible for that debt. Lenders will assume that the person had your permission to open the account and that you provided the necessary information (social security number, etc.) to that person. Even if additional charges are made that you do not approve of, you will be expected to pay if you provided access to the credit account for that individual.
In the case of
identity theft (unauthorized account opening), you may notify the creditor that the debt is not yours and that it was not authorized. The creditor will require proof that a police report was filed against the perpetrator. Once proof has been confirmed, the debt must be removed from your credit report.
In situations where you know the individual but did not authorize the use of credit, you must be willing to file a police report against that individual who committed the offense. This can be especially troubling when the individual is a friend or family member, which is frequently the case in identity theft situations. Unless you are willing to press charges against a family member, you are responsible for their actions.
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debt management program combines credit counseling and a structured repayment program to allow for an easier payoff of unsecured debt. The principal balance is not reduced. Instead, debtors repay their debt in full, typically through
lower monthly payments and with
lower interest rates. Most debt management programs are completed in three to five years.
A debt management program helps to restore credit ratings through on-time payments and elimination of debt balances.
Debt management programs are often
confused with debt settlement plans.
Debt settlement plans are rarely an effective option. Any debtor who is in default may
negotiate their own settlement offers with a collector without utilizing the services of a third party. A debt settlement company simply sends form letters on your behalf once you accumulate enough money in their account for a potential settlement. Most debt settlement companies charge 15-35% of the "savings" as their fee.
Debt settlement companies are
prohibited from charging any advance fees for a debt settlement plan due to a change in the Telemarketing Sales Rule by the Federal Trade Commission. Any debt settlement company that charges fees prior to a settlement being paid may be in violation of federal law.
Debt settlement can result in substantial tax consequences for an unprepared debtor.
Forgiven debt is usually considered to be taxable as income at your marginal (highest) tax rate.
For accounts that are not in default,
credit counseling may be the better option. For substantial debt that is in default,
bankruptcy is a more feasible option. Debt settlement clients frequently experience
legal action by creditors before they are ever able to complete a debt settlement plan.
Establishing credit can be tricky if you have no reported credit history. Car loans, mortgage loans and other big ticket purchases on credit are not reasonable options when you have no credit.
Instead, start with a bank account. While not reported as a positive credit item, a bank account does show that you are banked. An established relationship with a bank or credit union can lead to borrowing opportunities with that same institution.
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secured credit card is one option to establish credit, and some products are eligible for conversion to an unsecured credit card after a term of error-free use. A store card may also be easier to obtain when you are getting started with your credit history. A personal loan may be another option, especially if you have property to collateralize the loan. Avoid applying for too much
new credit or you risk damage to your credit scores.
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statute of limitations does exist on debt. It depends on how the debt is classified (written or open account) and it varies by state. Some states restrict the statute of limitations to just three years, while others allow for full collection rights by the creditor (or their collection agent) for fifteen years (Kentucky and Ohio).
The statute of limitations provides debtors with a valid defense from judgments. Debt collectors cannot win a judgment for a debt whose statute of limitations has expired if the debtor notifies the court of this fact. A debt collector that threatens to sue once the statute of limitations has expired is likely in violation of the
Fair Debt Collection Practices Act. You may
sue debt collectors who have violated your rights by harassing or illegally threatening you.
The statute of limitations has zero to do with collection attempts. A debt collector may continue to pursue collection of an unpaid debt even after the statute of limitations has expired. Similarly, a debtor may advise a debt collector at any time that collection calls are inconvenient and thereby request that the collector cease and desist from all telephone contact. A letter may be sent in the case that the
statute of limitations has expired to request the same termination of contact.
The statute of limitations may be renewed if you send a payment or even just for acknowledging the debt (in certain states). The statute of limitations may not be renewed if a debt collector sells the debt to another collector.
While you may have been told that a 30% credit utilization ratio is OK, credit bureaus actually dock you points anytime you utilize more than 10% of your available revolving credit. In order to maintain higher scores, aim for an
ideal credit utilization ratio of under 10%.
Credit utilization is measured both individually and collectively. If you owe $1,000 on a credit card with a $5,000 credit limit, your utilization ratio is 20%. A second card with a $2,000 balance on a $5,000 credit limit has a 40% utilization rate. Collectively, your overall credit utilization ratio would be 30%.
FICO credit scoring models penalize borrowers for having a
high proportion of balances to credit limits on revolving accounts (Risk Score Reason 10).
Current payment status is one of the most important factors on your credit report. If you have been delinquent, you can regain many of the lost points from your credit scores by bringing the account current again.
That being said, a credit report will record your good and bad payment history for some time. Good payment history is rewarded by providing proof on your credit report for ten years. Negative factors such as late payments will continue to show on your credit report for seven years, even if the account has been brought current again.