What To Do if Your Parents Have Harmed Your Credit

Introduction

It might seem crazy, but parents harming their kids’ credit is a relatively common problem. This isn’t about teens and young adults being naïve with their finances — but parents accidentally, or deliberately, destroying their own child’s credit.

How does this happen? Often it’s through an act of desperation by someone who’s just not good with their own credit. They see their child, with a squeaky clean credit slate, as being a good means to an end. That end game, of course, is getting more financing for themselves when they don’t think they have any other options.

So the parent might open a new credit card, loan or utility bill in the child’s name, using the child’s social security number. The kid trusts that it’s all on the up and up because parents know best — or at least, they’re supposed to. And sometimes the child has no idea this is even happening until it’s too late.

In other cases, the parent might make the child an authorized user on a maxed-out card, which could damage the child’s credit by association. Or the parent isn’t good at teaching financial responsibility, so the child grows up not knowing how to earn an income, takes out too many student loans, or recklessly overdrafts their credit cards when they finally get them.  

Unfortunately, if any of this happens to you, you’re starting off your adult life already in debt and potentially with a low credit score. Luckily, this issue is fixable if you know what to do.

Freeze Your Credit

If your parents just didn’t teach you how to properly manage your credit (and your life), it’s not the end of the world. There are plenty of places where you can get free financial education, including on this website. With a little bit of knowledge, you can easily turn your situation around.

However, if your parents or guardians deliberately used your personal information to get loans or open lines of credit, you need to nip that activity in the bud. The first step is to freeze your credit so nobody can apply for or take out new credit in your name. That includes you … but you do have the option to unfreeze it once you get this situation under control.

Freezing your credit is like locking your credit report so it can’t be accessed. You can submit this request online or over the phone with each of the three credit bureaus — Experian, Equifax and TransUnion. Each bureau will likely mail you a PIN code to use when you want to lift the freeze, either temporarily or permanently.

The information you’ll need to freeze your credit may include:

• Social Security number
• Date of birth
• Proof of address
• Government ID
• Tax documents or bank statement

Review Your Credit History

Now that you’ve blocked any further activity, pull your credit reports to review your credit history. Look for unfamiliar accounts, which could indicate identity theft. Another red flag is if your Social Security number or other personal information is wrong. While credit reports don’t always include your SSN, they may list incorrect SSNs that have been attributed to you.

You’ll also want to check your credit score, which you might be able to get from your bank or credit card account for free. A good credit score, in the range of 670 or higher, means you acted in time. A poor score, like 500 or less, means you have some damage control to do.

Notify Credit Bureaus and Creditors

If you see anything fishy on your credit reports, you can dispute it with the credit bureaus. Activity that happened without your knowledge counts as identity theft. If you knew your parents were using your info but you didn’t understand the repercussions at the time, explain the situation and ask for those line items to be removed from your report. It’s not guaranteed, but your request might be successful.

You can also contact the creditors directly. Each credit card company has a process for submitting documentation to prove you didn’t create or authorize the account. You might need to supply a police report to go with your claim, so be sure to complete that paperwork first.

Report the Identity Theft, if Applicable

Nobody wants to report their parents, even if they stole your identity, destroyed your credit, and ultimately made your life much more difficult. After all, they probably gave you life in the first place and likely cared for you somewhere along the way. But that doesn’t give them the right to hurt you.

To stop the vicious cycle, you need to report that your identity was stolen. That might sound harsh, but if someone used your personal information to open an account in your name without your knowledge — even if it was one of your parents — that’s the definition of identity theft.

Here’s what to do when your identity’s stolen:

• Use the identity theft resources at Consumer.gov
• Create an account at the FTC’s IdentityTheft.gov to get a personal recovery plan
• Place an online fraud alert with one of the credit bureaus
• File a police report with your local law enforcement
• Apply for a state Identity Theft Card through your Attorney General’s office if available

Rebuild Your Credit

Once you’ve stopped the bleeding, you can work on rebuilding again. And that’s going to require unfreezing your credit reports so you can get a new credit card of your own.

If your credit has been severely damaged, you’ll probably only qualify for a basic or secured card with a low credit line. But with a bit of dedication, paying off your balance every month before the due date, you should see your credit score start to steadily climb.

Here are some steps to take:

• Pay all your utility bills so you’re not in arrears
• Keep up with any loan or mortgage payments
• Compare credit card options that work for you
• See if you pre-qualify for the best fit
• Consider any pre-approval offers you receive
•  Apply for one card to start rebuilding your credit
• Get a secured card if you’re not approved for unsecured
• Charge a little bit each month
• Keep your balance under 30% of your credit line
• Pay off your card before every due date
• Work with a credit counselor if needed

Build Your Savings

Savings aren’t the same as credit, but they go hand-in-hand. Building up your savings prevents you from struggling financially when you can’t get credit. And it helps you recover from this bleak situation by providing resources to move forward.

Even better? Savings accounts are available to everyone. Regardless of your credit score, you can open a bank account, certificate of deposit (CD), or high-yield savings account and start to grow your money.

Here’s how to get the most out of your savings:

• Choose an account with the highest available interest rate
• Look for special introductory offers to boost your earnings
• Make sure you can manage the minimum deposit
• Check for ongoing minimum balance requirements
• Understand any fees, like maintenance, overdraft or ATM fees
• Find out how and how often you can access your money
• A CD locks up your funds for the term
• A savings account allows more withdrawals
• Weigh the pros and cons of each option

There are plenty of vehicles available for growing savings, so shop around and pick the one that works best for you and your situation.

How Long Will It Take To Fix My Credit Score?

Improving your credit score is a marathon, not a sprint. Depending on how much damage your parents did, it could take several years to see results. On the other hand, you may start to notice some positive movement in as little as a few months.

The answer really depends on where you’re starting from and what put you there. When we’re talking about a high credit utilization ratio from maxed-out cards, or a hard inquiry from applying for new credit, those numbers can even out after about three months.

But missed or late payments can take 18 months or more to overcome. Bankruptcy stays on your credit report for up to 10 years, and it could take at least six years for your credit score to recover.

So how do you get that number to start climbing? There are some tried-and-true methods for improving your credit score, and they all require diligence to establish new habits. But once you do, the credit bureaus view you as responsible instead of a risk.

Here are the steps to improve your credit score:

• Make all your payments on time, every time
• Pay your balances in full if possible — but at least the minimum due
• Keep your credit utilization ratio below 30% of your limit

If you have any of your own cards that weren’t opened fraudulently, keep them active to establish a longer credit history. But in this case, that might not be an option.

Bottom Line

It’s disheartening to realize that your credit score is lower than you thought. But it’s downright devastating to find out that your parents are the ones who made it that way. Not only is this a financial setback, but it’s an emotional slap in the face that can affect your entire family dynamic. That can lead to mental and physical health challenges as a result.

The good news here is that it’s possible to rebuild your credit. It takes time, it takes determination, and it takes diligence. But you can do it if you dedicate yourself to achieving that goal.

If you’re unable to get approved for a credit card to help you on that journey of financial recovery, check out some of the credit-rebuilding options from Credit One Bank.