By: Lesley C., University of Texas at Dallas
I am fortunate that my parents instilled in me great credit-building practices. Early on I knew to pay off my credit card balances each month to avoid interest payments, and to manage my bank account by including a cushion balance that would circumvent accruing overdraft fees. I also learned to pay things early in order to avoid late fees, and to seek out the best APR and terms for credit. I carried these principles into my mid-twenties, which continually increased my credit ratings. I took pride in my spotless financial record. However, I learned by putting my credit on the line for another person, I could wipe out all of my hard work.
To begin with, my cousin, her husband, and I were great friends, and the three of us would have great times together. I learned early on that he was always interested in the next big thing: the next big television, the newest video game systems, sports memorabilia items, and so on. As a friend, I was able to enjoy the benefits of all of these new purchases. One day we were talking about a bonus my cousin and he were going to receive, and of course he was already planning on what he was going to buy with the money. We were getting excited and eager to go get these new toys. Then, knowing about my impressive credit, he suggested that we could buy these things now on my credit, and he would be able to pay me before the bill was due. I was a bit hesitant, but after some pleading and knowing he was family, I agreed. We spent about $10,000 on my credit card. Later that month, to my relief, the money came in, and I paid off the balances on the credit cards.
As a result of this newly established financial relationship with my cousin, a similar situation arose about a year later. Because of the large purchases earlier, I was able to receive numerous benefits such as cash back, reward points, and drastic increases in the available credit on all of my cards. So, with the trust after the first transaction, and the expectation of rewards I would receive, we went shopping. However, this time he spent a lot more. When it was all said and done, I had over $25,000 charged to my credit cards. No worries though, the money was coming in right?
Unfortunately, my cousin and her husband filed for a divorce soon after. The expected income that was going to be used to pay me back was not his; it was actually hers. Since she was not involved in the agreements he and I made, I did not feel like it was appropriate to seek recovery from her. I expected him to pay me. I could not afford the payments, so I stopped making payments for the cards. I hoped the balances might eventually be written off by the creditors, but there were not. Consequently, I was left dealing with the creditors alone.
For this reason, my credit was tarnished. I began receiving collection calls, letters of possible lawsuits, and felt completely lost as to what to do. My boss had some experience with this, and advised me to be proactive in dealing with the situation. Therefore, I decided to seek council with a lawyer, and discovered that I could file bankruptcy to give myself a second chance. With little options left, and eager to get some resolution to this, I filed Chapter 7 bankruptcy.
It has now been 4 years since my bankruptcy was settled, and I am on track to build my credit back up to where it was before. I have learned that I must be more protective of my finances and credit. Entering into any financial agreement with friends, and even family, should not be taken lightly. Credit should not be used frivolously, and if I could go back and not offer my credit for use of mere convenience, I would. No matter who I make arrangements with, in the end, it is my name on the card, my credit on the line, and my responsibility to bear.