How to handle a parent abusing your finances
A parent is supposed to be a child's protector, teacher and the one person who can be trusted above anyone else. Unfortunately, unfettered access to another person's life can lead to a unique type of abuse that's rarely discussed: financial abuse. A parent knows all the details needed to open a credit card, take out a loan and even get a mortgage in a child's name – all without the child being aware his or her financial life has been ransacked.
Common Types of Financial Abuse
Parents know all of a child's personal information needed for many financial products: name, address, Social Security number and birth date. Many parents don't abuse a child's financial life to be malicious, but rather because a monetary issue at home has caused them to see opening another credit card or taking out a loan as a way out.
Here are 5 ways parents have abused a child's finances:
- Opened a credit card in the child's name and used it to run up a balance that couldn't be paid down.
- Took out a loan with the child's information and defaulted.
- Used the child's information to get a mortgage on a home.
- Co-signed a loan and took out more money than the child needed – then spent the difference.
- Applied for consumer goods like a cellphone in a child's name – then didn't pay the bill, so it went to collections.
How to Recover From Financial Abuse
The road to recovery from financial abuse can be long and painful. It will either require frank conversations with a parent, reporting a parent to the authorities or a willingness to handle the mess a parent made. If you're in this situation, here are some steps to take.
Step 1: Pull your credit report.
The only way to know just how bad the situation is to confront it head on. Pull your credit report from each of the three credit bureaus: Experian, Equifax and TransUnion. Everyone is entitled to a free credit report each year and can access it at AnnualCreditReport.com.
A credit report will show all the lines of credit open in someone's name and the current status of the debt.
Step 2: Place a credit freeze with all three bureaus.
Putting a credit freeze on your reports makes it difficult for anyone to open credit it your name. The freeze also prevents a lender from pulling a credit report, thus blocking someone from opening a credit card or taking out a loan. When you freeze your credit report, you'll receive a personal identification number and set a password needed to lift the freeze.
Freezing a credit report is typically free for identity theft victims or those who have filed a police report. Otherwise, the price is around $10 depending on the state.
Step 3: Discuss the situation with your parent.
Victims of financial abuse who can identify their abusers should be willing to have an open and honest discussion about next steps. The victim can take a few different paths when working to clean up his or her credit score and credit report, one of which will be to report the relative to authorities. Obviously, the ramifications of sending a family member to jail is enough to make most victims handle the burden of repayment or work out a deal with the family member. Either way, this needs to be a conversation so the family member has an opportunity to step up, take responsibility or, at the very least, contribute financially to repair the damage.
The victims also need to do thorough research to understand their role and responsibility. Don't take a parent's word if mom or dad says the credit card can get paid off or your name can be taken off a co-signed loan.
Step 4: Pay off the debt, or file a police report and tell the credit companies what happened.
After discussing the matter with a relative, it's time to come up with a payment plan or take the legal measures to get out of the mess. Telling the lender what happened could result in the lender pressing charges against the abuser. Filing a police report could also result in an arrest. Think very carefully through next steps and the best way to handle the situation both financially and emotionally.
There Is No Easy Way Out
Financial abuse ruins trust and can make a person's life incredibly difficult. Rehabilitating a credit report and paying down debt will take time, patience and, most importantly, diligent planning.
Copyright 2015 U.S. News & World Report