If you suspect that your partner is wrecking your good credit it can be a frightening situation. How do you really know what’s going on? How do you protect yourself? How can you clean up the wreckage? These are just a few of the important questions you need answers for pronto. The good news is you have options and you don’t have to let Mr/Mrs. Spendthrift trash your financial future.
The thing is, when your partner sinks their credit, this behavior can have far reaching consequences for you. My guess is you’ve worked way too hard to get to where you are today to sit back and let that happen.
Let’s break this problem down, discover exactly what’s going on and how to protect yourself.
One of the very first things I’d do if I thought my spouse was financially irresponsible would be to order credit reports to see what the damage is. In a perfect world, you’d want to get reports for both you and your partner. But even if you only get your own credit report, that’s OK. This step is important because, among other things it provides a list of all the accounts you are responsible for.
Your credit report will also show you all the financial sins your partner has committed on accounts you are listed on. You may even find that he/she opened joint accounts without you even knowing about it. If you do, I suggest you immediately close those accounts. That at least stops the problem from getting worse. But get ready for things like this and other unpleasant surprises. Sorry friend.
And don’t be troubled if you see a mess on your credit report. There are plenty of ways to dispute the negative information you find there. And one of your most potent weapons are the consumer credit protection laws. These state that in order for negative information to remain on your credit report it has to be accurate, verifiable and complete.
That means if your partner opened up accounts in your name without your knowledge, any negative information associated with that account cannot be included on your credit history. Did the negative item occur? Yes. But since the account was opened fraudulently, the credit bureau must take this item off your report.
As I said above, your immediate objective is to shield yourself from your partner’s runaway spending and the credit carnage that ensues. Towards that end, don’t allow them to use a credit card you are named on to run up a bill. If they want to spend their way into a financial hell, that’s not your problem. You don’t have to go along for the ride.
If you have a joint credit card with Mr or Mrs. Loosey Goosey don’t worry. While that used to be the kiss of death for your credit standing, you are probably fine. Most credit card companies today don’t issue cards to joint owners. They use primary and secondary users instead. That means if you are only a secondary user, you’re not on the hook for your husband’s evil spending ways. And if you are the primary user, you can simply call your credit card company and kick him off the account immediately. How sweet it is!
In the unlikely event you do have a joint account, I would call the issuer and close the account post haste. You might still be on the hook for everything that has been charged up until now but at least you can stop it from getting any worse.
If your credit card issuer tells you that you can’t close the account on your own, ask them why. Probably the reason is that it’s a joint account and there is a balance due. That’s fine… you still have a few tricks up your sleeve.
In that case, I would hang up the phone and call back 30 minutes later and speak to a different agent. Tell them you lost your card. This freezes the account for up to a week. During that time, pay off the balance and then try again to resign from the account. Chances are the credit card company will let you off the hook at this point because the balance is paid in full. Tricky…but useful.
If you own property jointly the only way out is to sell the property or to refinance it. The thing is, you have to be very careful about this step. Your main goal with property is to remove him or yourself from the ownership/liability equation.
In other words, if you are going to maintain the property in your name alone, that’s fine. You’ll have to refinance and get him to legally relinquish his rights to any equity.
If you want out of the mortgage on the other hand, your husband will have to refinance and you’ll have to sign over your equity. Of course one can compensate the other for forgone equity. But the point is, you don’t want to take over the liability of owning a home unless you have all the ownership rights and benefits.
If property is involved, I’d definitely speak with a real estate attorney before moving ahead.
Banking & Investments
Dealing with joint bank and investment accounts is very straight forward. Some joint accounts allow either party to withdraw funds and others require both parties to sign off before they release money. All you have to do is find out how your accounts are set up.
If your particular accounts only require one signature all you have to do is go down to the bank or investment firm and withdraw your money. Once you do that, set up an account in your own name and leave it there until the dust settles.
If you do make a large withdrawal, talk to you attorney. You may be able to withdraw the money in order to protect it but it may or may not be your best legal move especially if you think you are going to end up getting divorced. So if either party can withdraw money, I’d very quickly call an attorney and then take the appropriate steps to safeguard the assets.
If the account is set up in such a way that both of you have to sign off before any money can be withdrawn, you are protected. Your husband can’t touch your money unless you give your approval first. Whew.
When your spouse behaves irresponsibly; it’s selfish and a kind of betrayal. That feels just awful. I get it and you will have time to deal with that. Now, your most pressing action steps are to determine the extent of the problem, then protect yourself and clean up the wreckage. Depending on the situation, you may want to talk to your husband before separating your finances or after you’ve taken steps to protect yourself. But the good news you can take all the steps outlined above within an hour or two of discovering the problem.
Neal Frankle is a Certified Financial Planner® in Los Angeles and the chief editor of WealthPilgrim.com, CreditPilgrim.com and MCMHA.org