해외자료 Spouse's credit-card debt could tarnish you_May 16, 2005

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Spouse's credit-card debt could tarnish you

Published May 16, 2005

Q: My wife has run up a balance of thousands of dollars on her credit card. I try to stem the flow but usually unsuccessfully. Am I liable for these debts?

A: I checked with the folks at Your Credit Card Companies, a group of major financial services companies that provide useful information on handling credit, enhancing your credit score and preventing identify theft (see Web site www.YourCreditCardCompanies.com). Their answer to your question is a resounding "It depends."

If the credit card your wife is using is part of a joint account with you, you are as legally liable as she is. And the way she handles the card will reflect on your credit score as well as hers.

"It would affect him the same way it would affect her," said Ryan Sjoblad, a spokesman for Fair Isaac Corp. in Minneapolis, the company that developed the widely used "FICO" credit scores (for more information, see Web site www.myfico.com).

That does not mean both spouses would necessarily end up with the same credit score, because most likely they had different ones before they married. But both would see their scores fall if one spouse keeps piling up debt on their joint account.

A drop in your score could be costly. Today, a credit score is one of the leading factors that lenders use in deciding whether to grant credit and, if so, what interest rates to charge. Increasingly, auto insurance companies also are considering credit scores in their underwriting and the premiums they charge different customers for the same coverage.

The score for each person is calculated from information on consumer credit reports in five major categories: payment history, amounts owed, length of credit history, new credit applied for or taken out, and types of credit used.

Therefore, if your wife is maxing out a card held as part of a joint account, and particularly if she is falling behind on her payments, it will hurt both your credit scores.

All the above is also true even if you don't have a joint credit card account with your wife, but have named her as an "authorized user." In the broadest sense, an authorized user is anyone who uses your credit card with your permission. More commonly, the term refers to a person you so designate when you open an account.

Authorized users get a card with their name on it. As with joint accounts, how they handle the card is reflected on their own credit reports as well as those of the person who named them.

But only the person who opened the account and named the authorized user is legally responsibly for paying any debts.

The obvious conclusion: Don't name anybody as an authorized user -- whether a spouse, child or other relative -- if you are not sure that person can handle credit responsibly. Some financial advisers even recommend that newly married couples keep separate credit cards and don't name each other as authorized users so each spouse can develop a credit record and score independent of the other.

Let's say none of this applies, and your wife's credit card account is in her name only. Are you off the hook for her debts?

Not necessarily.

If you live in a community property state -- Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin -- the rules are different. In those states, both spouses are responsible for debts incurred during the marriage, and the individual debts of one spouse may appear on the credit report of the other, said Dan Drummond, a spokesman for Your Credit Card Companies. Legally, you may be liable for debts you don't even know exist, and those debts also can hurt you credit score.

So, the basic rule is that a spouse is not liable for the credit card debts of the other as long as it is an individual account, the spouse running up the debt is not an authorized user, and the couple does not live in a community property state.

But even then, the assets of the spouse not running up the debt could still be at risk. "It depends" would again be the answer. In cases involving bankruptcy, divorce or other litigation, for example, creditors may go after assets held jointly by the debtor and nondebtor spouse, such as a bank account in both their names.

Rather than possibly mislead you with too-broad rules of thumb, I would suggest in cases like this that you seek assistance from a qualified legal adviser.

Humberto Cruz can be reached at AskHumberto@aol.com or c/o Tribune Media Services, 435 N. Michigan Ave., Suite 1500, Chicago IL 60611. Personal replies are not possible. Look for other columns by Humberto Cruz in Wednesday's Business section and in Sunday's Health and Family section.

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