5 Ways you're damaging someone else's credit health

Credit score plays an important role in deciding your financial health. It is also the key factor to understand whether or not you are a financially responsible person. It also helps to get a rent with better terms, a good job, better loan terms, etc.

In short, the better your score, the more financially responsible person you are.

Thus, most of the people prefer to maintain a good credit score by not making financial mistakes.

So, you should be careful when dealing with finances.

Financial mistakes are ruinous; sometimes your mistakes affect someone else’s financial health and credit score as well.

What are those mistakes? How can you avoid this from occurring?

Read the article to know in detail.

1. When you don't pay a co-signed loan

Many people prefer to take out a co-signed loan for buying a car or renovating a home. In most cases, they ask their parents or spouse to co-sign the loan.

The rule is, if the primary signer fails to pay the loan or misses the loan payments, the co-signer has to pay the entire loan.

The person who signs the loan is liable to pay off the loan if the primary signer stops making the loan payments.

If the primary signer is late on the loan payment, it has a negative effect on his/her credit score including the co-signer's credit score.

If the primary signer completely stops making the loan payments, then the co-signer's credit score will drop even more.

This way, you are actually ruining the co-signers credit health.

I think this is totally unethical since that person helped you by co-signing your loan.

How can you avoid this from occurring?

  • Well, the main thing is, your loan is your responsibility. You need to think about your affordability before taking out a loan.
  • If you think you're going to be late on payments or you can't make the payments at all, then you should talk to your co-signer about your financial hardship. You can request your co-signer to make the payments for the time being so that both of you can avoid credit damage.
  • Try to pay back the money when your financial health improves.

2. When you don't pay your portion of rent

Rent is expensive. Most of the students prefer to stay with a roommate and share rent.

Remember, when you are sharing rent, both of you need to sign a lease or agreement. Both of you are liable for the rent.

If you move out without paying your portion of the debt, then the landlord will grab the money from your roommate whose name is on the lease.

If the person denies paying the entire rent, the landlord can inform a consumer reporting company (RentBureau) about the missed payment.

The landlord can directly notify the credit bureaus as well. This will damage your roommate's credit score.

If a person signs the lease solely and shares the rent with a roommate based on a verbal agreement, then the person whose name is on the lease is liable for the rent.

If the roommate moves out without paying the rent, then the person, whose name is on the agreement, has to pay the rent. Otherwise, the person’s credit score will drop.

How can you avoid this from occurring?

  • Try to be honest when it comes to building a financial relationship. Don't play a safe game by not putting your name on the agreement or lease. Remember, not signing an agreement can create more troubles that you never realized.
  • Try to pay your portion of the rent on time. If you have to move out suddenly, then inform your roommate about it. Try to send the money to your roommate.
  • If you think you can’t pay your portion of rent, then inform your roommate about it. Request him to manage the situation.

3. When you accumulate debt as an authorized credit card user

Most of the youngsters are becoming the authorized credit card users to build their own credit history.

Most of the times, their parents become the primary holder of their credit account. They get the statements; they are liable to pay the bill.

But, a person should keep credit cards when he/she can afford the bill. Getting a credit card is not enough; you are responsible for the credit card bills as well.

If you think you can use the credit card randomly because the bills will go to the primary holder, then you are intentionally damaging the person's credit score.

How can you avoid this from occurring?

  • Remember, becoming an authorized user of a credit card is easy, but paying the bill is not that easy. You have to be mature enough to manage your credit card properly.
  • If your earning is not good, then don't go for a credit card.
  • Don’t ask your parents or spouse to become a primary holder of your credit card.
  • If you use a credit card, then pay the bill within the stipulated time.
  • Using credit card is necessary to build a credit history. But, don't use the card randomly. Stay within your means. If you can’t afford an item with cash, then you are unable to pay the bill as well.
  • Use a credit card as a debit card. Pay the bill in full and within the stipulated time.

4. When you push your friend to spend money on you

Sometimes, due to peer pressure, people fall into financial trouble. Peer pressure forces people to take out a personal loan that they can't afford to pay off. Once they default, their credit health gets hurt.

Asking your friend to fund a car trip, party, brunch, or even a movie, is not a good gesture.

Yes, you can ask for a treat from your friends if they achieve something special in their life.

But giving the treat is absolutely the person's own decision.

How can you avoid this from occurring?

  • Remember, financial relationship is sensitive. Try to be humble and act as a sensible person when it comes to celebrating a special thing.
  • When you are in a group and experience other people are trying to push a particular peer to spend more, try to stop others from doing it.
  • Give the proposal to share the cost.
  • Ask the person whether or not he/she is comfortable with the plan.

5. When you don't pay the library fines

Some people borrow someone else's library card and don't return the book to the library. In that case, the cardholder needs to pay the fine on behalf of the person who did the mistake. The libraries in some cities even inform the collection agencies.

Borrowing a book from the library and returning the book late or not returning it at all is a mistake. You will be charged a fine for it. You are actually ruining the cardholder's credit health.

How can you avoid this from occurring?

  • Set a reminder on phone to return the book on time.
  • Don't think that the fine is just a few bucks; it is actually the reputation of the cardholder whose card you are using.

Some other financial mistakes can affect someone else's credit like not paying the parking ticket in a borrowed car, not paying your portion of the restaurant bill, not caring the room that you share with your roommate, not paying your portion of a loan of a joint account, etc.

Be aware when you are building a financial relationship. Your mistakes can affect other person’s financial health. Try to become responsible no matter how small the matter is. By doing so, you will be remembered as a responsible and generous person.

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