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Everyday Cheapskate: The authorized user may have cause for concern

Dear Mary: When my brother-in-law was a pastor, he was authorized to use the church credit card to purchase things for the church.

He has not been at that church for over a year, and the church has never paid the final bill of $7,000.

Because he was named an “authorized user” on the account, should he be concerned that this is impacting his credit report negatively? What should he do? — Cindy S.

Dear Cindy: Your fears may be well-founded because while your brother-in-law is an “authorized user,” he carries no financial obligation to repay the balance, yet every month the status of that account is being reported to his credit file.

If the church is making the required payments on time and not charging over the limit on the account, what is being reported will be positive. No worries there. But if the church falls behind in making the required payments each month, late payments showing on his report could quickly become negative for him, sending his credit score plummeting.

No matter the status of the account, as an authorized user he can simply call the creditor to request to be removed from the account. He should do that immediately.

Dear Mary: In 2008 I had zero credit-card debt. Now I have two credit cards with balances of $27,000 and $47,000. The issues that created the debt load have all been addressed and eliminated.

Is there a way to negotiate with the credit card companies to reduce the payoff amount? When I’ve looked into this, most of debt-settlement people suggest that if I miss a minimum of three payments, then the companies will negotiate. I would rather not go through that kind of pain. — Gene G.

Dear Gene: I believe you are referring to third-party debt settlement companies that promise to get your debt reduced.

You are right. Most will advise you that they can negotiate to reduce what you owe to just pennies on the dollar, but first you will need to stop making payments in order to send a signal to these creditor(s) that you may be getting ready to file for bankruptcy. And that’s where things can get dicey.

Honestly, those are the worst scam artists and I would recommend that you run, not walk, from anyone making those claims and giving that kind of advice. Did they mention their fees? They’re enormous. And horror stories abound for how these clowns run off with all the money you are not sending to your creditors each month, but paying to them instead for “safe keeping.”

Even if the banks were to negotiate your balances directly with you (don’t count on it), you would have to come up with the negotiated amount in full. And don’t forget that the amount forgiven would be reported as 1099 income on which you would owe taxes.

Look, you borrowed the money willingly, and you spent it. The right thing would be for you to pay what you owe.

I am happy to know that you have addressed the underlying issues that landed you in so much debt. You’ve learned some tough lessons — ones you are not likely to have to repeat. That’s a good thing.

Mary invites questions at mary@everyday cheapskate.com, or c/o Everyday Cheapskate, P.O. Box 2099, Cypress, CA 90630.

Mary Hunt is founder of www.DebtProofLiving.com, a personal finance member website.

To find out more about Mary and read her past columns, please visit the Creators Syndicate Web page at www.creators.com.

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