When a family member opens a line of credit in your name, it puts you in a difficult position. You don’t want to get someone you love into trouble, but you also don’t want to risk damaging your credit or being responsible for their spending.
Let’s look at your options for restoring your status with creditors and diffusing the situation with your loved one:
Call It What It Is
Regardless of whether a family member or someone halfway around the world opened a credit card in your name: it’s identify theft, and it should be taken seriously.
Identity theft is any instance where someone uses another person’s identity for financial gain. This could be a credit card, line of credit, or loan, among other things. It happens often: parents open credit in their children’s names. Family members activate credit card offers received through the mail.
In fact, over 550,000 victims of identity theft or fraud in 2014 said it was done by someone they knew.
It hurts when a family member goes behind your back for their own personal gains. You may even find it difficult to trust them again. And since they’re family, you might struggle with the idea of filing a police report or blowing the whistle on them. Even worse, you may want to take action but other family members might be pressuring you not to.
You’ve got some hard decisions to make, and none of them are rosy:
Option #1: Pay the Bill Yourself
Since it’s technically theft, you’re not responsible for any false charges made in your name. However, some credit card companies will require you to file a formal report in order to dismiss the charges.
If you’re not ready to do this, you can pay the bill yourself, then close the account so no future charges can accrue.
If you cannot pay off the account right away, request the account to be closed and work with the creditor to set up a payment plan. If they’re reluctant to do so, partner with a non-profit credit counseling agency, like the National Foundation for Credit Counseling, for help.
Option #2: File Formal Charges
If you want to avoid paying for items you didn’t purchase, you can file a police report against your family member. You may want to let your family member know ahead of time about your decision, though this can be a difficult conversation to have.
However, keep in mind this could work to your advantage. The family member may want to avoid going to jail, so they may decide to pay what they owe so you can clear your account.
If the payment to your creditors is late, regardless of who pays it, it will show up on your credit report and will stay there for seven years. Paying the balance is a good first step, but you can also include a 100-word statement on your credit report explaining that the delinquency was due to identity theft.
Don’t forget you can set up alerts on your credit report to safeguard you from identity theft in the future. The sooner you know about an issue, the quicker you can take action and prevent long-lasting damage to your good name.
Got questions? Drop a comment below and I’ll share in an upcoming video!