Helping Dad Get Out of Bad Credit

January 10, 2016

While the recent positive news on our economy seems encouraging, it’s of little benefit to the seniors among us on fixed incomes who are struggling with unmanageable credit card debt, or worse – bad credit scores. Do you know a parent or senior close to you who has been labeled a credit risk? Repairing a bad credit score is no quick task; and because it involves an unvarnished look at what can be painful financial choices, it’s often avoided (therefore compounding the problem). The good news is that, with time and patience, you can help Mom or Dad repair bad credit and start building a healthier borrowing history.

First, it’s important to know the hallmarks of credit repair scam artists who could already be trying to contact Mom or Dad. These sham organizations prey upon trusting seniors unaware of their legal rights. Here are three warning signs to look for:

  1. Their company wants Dad to pay in advance for their services. That’s illegal under federal law; all credit assistance companies must wait to ask for payment until all contracted work is completed.
  2. They encourage Dad to form a new “credit identity.” Some scammers will encourage applicants to apply for an Employer Identification Number to replace their SSN on a new credit report application. This too is illegal.
  3. The company promises to remove negative info on Dad’s credit report, even if it’s accurate. If the info on Dad’s report is legitimate, no one can get it removed.

The Credit Repair Organization Act requires companies to provide a written contract explaining in advance your legal rights and the services they’ll perform; how long it will take to get results; the total cost of their services; your three-day right to cancel at no charge, as well as any guarantees. If you or your parent suspect attempted fraud, you can report to your local consumer affairs office, state Attorney General, or file an online complaint with the Federal Trade Commission.

While hiring a legitimate credit repair agency is certainly an option, the steps to digging out of bad credit are simple and straightforward ones that you and Dad can do on your own. Here are three important tasks to get you started:

  1. Request Credit Reports and Review Thoroughly. Each of the nationwide credit reporting companies — Equifax, Experian, and TransUnion — is required to provide a free copy of your credit report once a year upon request. Review for errors line by line, with an eye for the slightest discrepancy; even a wrong address or misspelled name, when corrected, could improve Dad’s credit score. Head to the Federal Trade Commission website for more important information on credit reports.
  2. Get Dad on a Payment Schedule. Paying bills on time is one of the most critical factors in credit scoring, so it’s important to get Dad’s payment schedules in order right away. First, make a list of all creditors, cross-checking with bank statements for accuracy. Next, get Dad enrolled in automatic payment plans wherever possible to establish a timely payment pattern. If you’re concerned about Dad’s ability to manage on his own, consider being named an authorized signer on his checking account to take care of any accounts that need to be paid manually each month. Be wary of becoming a co-signer, however, as you could become financially liable for any unresolved debt.
  3. Reduce the Amount He Owes. While there are no quick fixes here, you may be able to make incremental improvements to his overall balance. Review Dad’s credit cards thoroughly and look for any 0% balance transfer offers. If there are none, shop around, or talk to his credit card companies; you may be able to negotiate a lower interest rate.

Want more information, or need a hand? The Association of Independent Consumer Credit Counseling Agencies offers local referrals, as does the National Foundation for Credit Counseling.