It seemed innocent enough. Your mother mentions that she applied for a new credit card and, in an odd moment of generosity, added you to the account as an authorized signer. You joyfully tuck the card away for a rainy day. But you never need to use it. You are a very responsible consumer, you tend to be lucky in both love and business, and life is good. You never use the card. Don't forget that fact.

Fast forward to the future. Your mother is entering a nursing home and being initiated into the world of end-of-life care. Medicare and Medicaid are no longer foreign words and you realize that you mother's savings cannot be used to pay off her final round of bills. You notice, a credit card statement tucked into her stack of bills. She owes a bit over $1,000 and you notice that she used the card for medication and medical bills. You recognize the credit card company name and realize this is the card on which you were made the authorized signer. You never used the card, so you shrug your shoulders, shake your head, and hope everything will be alright.

And then, one sunny morning, you get that call. It is a not-so-friendly representative from the friendly credit card company and they would like their money. You know, the money that your mother charged on that credit card that holds you as an authorized buyer? You sheepishly agree to a payment plan to pay down her debt. Mom's attempt to provide you with a safety net all those years ago has morphed into a financial burden for you. How is this fair? Is it even legal?

The short answer is no. It was not legal (and most likely not even ethical) of the credit card company to trick you into assuming this debt. If you are the authorized signer, you have no obligation to assume this debt.  (Had you co-signed for the card, however, you are indeed obligated to pay the debt.) However, the credit card company is within their rights to ask any authorized signer to pay up. So they ask. And many people will take on the debt of a parent, ex-spouse, or even a child because they do not realize their rights. 

So remember, if you are an authorized signer on a credit card, you are not obligated to assume outstanding debts accrued on the card. You can demand credit card companies and their collections associates to refrain from contacting you. You can even contact the credit bureaus and demand they remove all mention of this card and any associated delinquencies/collection efforts from your credit report. It is not your debt unless you choose to assume it. You're welcome!

If you are just starting out in the world, trying to recover from a bankruptcy, or the parent of someone who needs to build credit you are probably wondering how one gets started.  Crafting a credit history that will benefit you for years to come is something you should start when you are somewhere between 18-20 years old. It takes some planning and a lot of self-restraint to ensure your FICO score is high. A high FICO score results in higher amounts of credit being granted, more favorable interest rates on future loans, a leg up on jobs that check out your credit report, and the ability to rent anywhere you please.  Around 2009, America tumbled into an economic meltdown that left credit lenders not exactly friendly to newcomers in the credit market.  If you use the following steps and tips for building your credit portfolio, you’ll find lenders eager to lend you credit.

5 Steps to Building and Maintaining Your Credit Portfolio

1. If you don’t have credit, start small.  A lot of major credit card companies won’t give you a card until you establish credit for yourself. Start your credit portfolio by applying for one or two store credit cards. TJ Maxx and American Eagle have great in-store credit cards and are very friendly to newcomers. Interest rates on store cards are very high - do not forget to pay store cards in full each month.
2. Make small purchases that you can pay back immediately. Use each of your store issued cards to make small purchases and then pay them off as soon as you get home. Credit cards are tricky – if you look like you need credit, you won’t get credit. That’s why people apply for credit when life is at its best. Paying down your new accounts quickly will demonstrate you are a responsible and solid credit customer.
3. Six months to one year later, apply for 2 major credit cards.  Major credit cards are Visa and MasterCard; they’re offered by many lenders so consider who the lender is in your decision. A major bank or credit union is a better lender than some unknown company. The Discover and American Express credit cards are only issued by their respective companies. Most credit card issuers offer student cards that are easier to obtain but they are often more restrictive and carry high interest rates that don’t come down when you graduate. When you apply for major cards don’t list your student status; try to qualify for the card based only on your income and newly established good credit. This will save you interest in the long run. Scrutinize those interest rate offers and apply for the cards with the most favorable rates. Don’t take any of the add-on features you’ll inevitably be offered with the card as they are expensive and rarely worth the money.
4. Again make small purchases you can pay back immediately. Use each of your new major credit cards to make small purchases and then pay them off as soon as you get home from shopping. Demonstrating your ability and willingness to make your payments on major cards will also boost your credit score.  
5. Take out an installment loan for a car or other big ticket item.  The calculation of your credit score is based on several factors, one of which is the diversity of your credit portfolio. Credit cards fall under the category of revolving loans because you can borrow the same amount of money over and over (like a revolving door lets you go in and out over and over again). Installment Loans (the kind you have to make an application for each time you wish to borrow) is granted for a specific item. Once the loan is paid off, your business with that lender is finished until the next time you apply for a loan. Student loans, car loans, loans to take vacations, and loans to purchase musical instruments fall into this category.  Taking out a small installment loan and paying it back as agreed will increase your credit score.
   

Tips for Building and Maintaining a Stellar Credit Portfolio

• Don’t use your cards for everyday purchases. Tuck all but one of your major credit cards into a safe place at home. Keeping your cards out of your wallet will force you to think about purchases you’re planning to make before you go shopping. Keep one major card in your wallet (along with your checking card) to give you what credit cards are meant for – a quick loan in an emergency.
  

• Don’t max out your card. Never charge your card above 50% of the line of credit you have been granted (some people recommend 35% but that is pretty conservative). A maxed out card is an indicator of financial stress so maxed out cards will result in companies refusing to grant you credit (or lowering your current credit limit) and your credit score may plummet. 
  

• Make all of your payments on time. On time payments go far in building your credit portfolio. They indicate you’re both willing and able to afford your credit.
  

• Use your cards.  Credit cards can be confusing. You have a line of credit but you can only use about half of the credit granted. You should keep your cards tucked away so you aren’t tempted to use them. But you need to use your cards or they can go inactive. Here is a suggestion.  Keep track of when you use your cards that are tucked away. Take them out once every three months and use them to do something you were already going to do (e.g., go to movie or to dinner) and then pay the card off the minute you get home. Using your cards each quarter will keep your cards in active status while paying them off immediately will keep your credit score strong.
  

• Never close the first major credit card you open.  Part of your credit score is predicated on the length of time your oldest card has been open. Keep that first card even if you don’t particularly care for the company issuing the card. One of the reasons we suggested you open two major cards to begin with (although you will only tuck one into your wallet)  is so that you can close one of the cards in the future if you really hate the company – which happens. 
  

• Never ever, ever borrow the cash advance available on your cards.  Credit card companies will provide you a limited line of cash credit that you borrow against your card. This is called a cash advance. We won’t even tell you how to take a cash advance because it works against you - it is a major red flag to the company that you are cash strapped. They will send you checks; destroy them. They will call you; ignore them. Borrowing cash from a credit card comes with higher interest rates and very expensive penalties. They also start charging you interest the day the cash touches your hand (instead of waiting to charge you interest until the next billing period like other charges)  – then they destroy your standing with the company.
  

We all need credit for something and no one seems to have all the details on how to preserve good FICO sores or to build them. It becomes confusing to try to figure it all out. Do you get a new card and run up the credit - will that improve your credit score? How about if you apply for a bunch of new cards so you have high credit limits? Allof the anwers seem to be the same: it deptends. But there are some general rules of thumb you can follow to make creidt more fun instead just another source of confusion and frustration. It all seems to be about the almight FICO score. 

Your credit score is often referred to as your FICO score. It stands for Fair Isaac’s Corporation and isn’t really the only score out there – but for the sake of this article, we’ll refer to the FICO score. Here are a few facts about consumers and credit:

• The average consumer has a total of 13 credit obligations (including revolving, store cards, and installment loans).  Of these obligations, 9 are likely to be credit cards. 
• More than half of all people with credit cards are using less than 30% of their total credit card limit (total available line of credit on each card, on average, is $19,000). The higher the balances on your card (compared to available credit) the lower your credit score will go – even if you pay everything on time each month.
• The average oldest obligation is 14 years – that means someone is getting tons of interest from these people!. 
• Fewer than 6% of the credit carrying population has 4 or more hard inquiries in a one year period.  A hard inquiry is a credit check that shows up on your credit report as you seeking additional credit. A soft inquiry will only be reported to you (not creditors) when you pull your credit report. A lot of hard inquiries will lower your credit score.

 
6 Tips For a Better FICO Score

1. Pay your bills on time.  Sign up for automated payments if you have a hard time remembering to make payments.
2. Keep your balances low on revolving credit.  Under 35% will improve your FICO.  Lenders use different percentages and their percentage is usually considered a trade secret. In general, 35% is the lowest they’ll use so just stay below that.
3. Don’t open new accounts if you have ample credit.  New accounts generally lower your score. Unless, of course, you’re just starting out. It can be difficult to attain credit if you haven’t established a credit file – so be sure you have at least a couple of major credit cards open.
4. Close unused cards cautiously.  The ratio of number of cards to amount owing can impact your FICO. Also, keep track of which is your oldest card and always try to keep that account open; even if you only make small purchases.
5. If you’re making a large purchase, do your a.p.r. (i.e., interest rate) shopping within a short period of time (45 days was recommended).  The FICO score sometimes compensates for rate shopping if the inquiries are all within a short amount of time.
6. A new account with a recent late payment will hurt your credit score terribly. Don’t let this happen to you.

If you think all Americans are equally credit worthy, think again! The economy has impacted some states more heavily than others, meaning people living in one state are more likely to have had negative credit impacts than others.  How is your state doing? Good question.  A score greater than or equal to 700 is generally what you want to aim for – so some states are still struggling more than others.

Median FICO Scores by State:                               

Above 728                      712 - 727                                 691 - 711                                        656 - 691
CT                                         CO                                             AK                                                     AL
IA                                           HI                                              AR                                                     FL
MA                                         ID                                              AZ                                                     GA
MN                                         IL                                              CA                                                     LA
ND                                         KS                                             DC                                                    MS
NE                                         MD                                             DE                                                    NM
NH                                         ME                                             IN                                                      NV
RI                                          MI                                              KY                                                     OK
SD                                         MO                                            NC                                                     SC
VT                                         MT                                             TN                                                     TX
WI                                         NJ                                             WV                                                    
                                             NY
                                             OH
                                             OR
                                             PA
                                             UT
                                             VA
                                             WA
                                             WY

Has the economy done a number on your checkbook?  You aren’t the only one. Unemployment rates remain high, foreclosures abound, and you can find a hard luck story on almost any street corner. So how do you dig out of this mess? A lot of good people have decided the road to any future might well be bankruptcy. Not a pretty road; but one that might help you pull your life straight and help you move forward.  But the bankruptcy process can be long and confusing.  Is it worth it for you?  You will only know if you learn enough about it make an informed decision.  There are 4 rules you need to understand before you file for bankruptcy:

1.      Any bankruptcy can remain on your credit file for 7-10 years (or longer). If your credit score is currently good, you have more to lose by filing.

2.      Most credit card providers will shut down your credit cards.  The good news is any debt you owe them will be taken care of by the bankruptcy process.

3.      Federally backed student loans most generally can’t be discharged.  However, private student loans can.

The bankruptcy option you choose may help or hurt you depending on your personal situation, including how many assets you still have. It’s a good idea to get an attorney (or at least consult with one) as you pursue a bankruptcy.

1. If you can’t afford it, you can’t afford to charge it. Sorry, but your mother was right on this one. Your goal is to pay your card in full each month. This way you earn rewards, miles, cash back, etc. without accruing interest charges.  So if you don’t already have money in the bank to pay for the item, don’t buy it.

2. Never ever ever use your card to get a cash advance. Ever! This is one of the most expensive ways to borrow money.  You’re charged an up-front fee, interest begins to accrue the day you take the money, and interest rates are usually much higher than usual.  Additionally, credit card companies can view that cash advance as a red flag that you are having a financial crisis – and cut your credit limit.

3. If you have been caught in a credit crunch and can’t pay that card in full each month, don’t use your cards to purchase food and gas.  Using your card for items that will no longer exist when you are paying interest on the bill is very expensive.  Using a card to purchase food will not compel you to live within your budget – so you buy that extra steak right when you can’t afford it the most. Some credit card companies have started programs where you can avoid paying interest on purchases of food and gas when you are paying monthly interest. Don’t use it!  Pay cash for food and gas purchases so you can keep a firm hold on which items you can afford.

4. Don’t purchase services offered with your card.  They are unnecessary, overpriced, and structured to the advantage of the credit card companies. Why do you think they keep calling you to ask if you want these add-on services?  It’s not because they like you!

5. Stop!  Don’t tuck that card into your wallet! Tuck it away with your important documents unless you intend to use it – or in your sock drawer. This way you can’t use your card unless you have given it some serious consideration (and gone home to retrieve it). The going home time can give you a few minutes to cool off and be sure you really want the item you intend to purchase.

 6. But break the above rule a teeny tiny bit. Keep one of your cards in your wallet along with your checking card.  This way if you experience a checking card fail, you have a back-up plan right in your wallet. Save yourself some embarrassment because all cards have a problem at some point.

 7. Keep all of your cards in active status. Use each of your cards at least once every three months to keep the card companies interested in you!  Then make the payment immediately!  For example, if you’re planning to go to a movie: charge the evening on one of your cards, enjoy the movie, go home and pay the card off on-line. 

Do you have additional tips?  Feel free to leave them here!