5 true credit horror stories

scary credit storiesIt’s customary to share scary stories around Halloween. So we put out a request for frightening credit tales – and heard back from several people whose good intentions, trust in others and just plain bad luck landed them in unenviable situations.

These accounts aren’t meant just to horrify, though, but to educate. While ghosts and ghouls aren’t real, these five stories are – and so are the lessons those who shared them hope you’ll learn.

I took on my friend’s student loan debt

In the fall of 2013, just before her 21st birthday, Alix Gorshow was asked by her roommate and (at the time) best friend to co-sign a student loan. Knowing that her friend had money problems and would have to take a semester off of school if she couldn’t get the loan, Gorshow agreed to help.

At the time, she admits, she had “absolutely zero” knowledge that co-signing meant she’d become responsible for the loan if her friend neglected to pay.

“I just thought I was giving her the credit boost she needed to qualify,” Gorshow says. “She promised she would pay it back and that I would never have to.”

Flash forward to 2015, when Gorshow started getting calls from the loan company. Her (now former) friend had made just two payments on the loan over the course of a year, and interest had caused the original $8,000 balance to swell to more than $9,000. Gorshow’s friend wasn’t just ignoring the loan company – Gorshow’s calls, texts and Facebook messages have gone similarly unanswered.

Gorshow used a legal-help referral service offered by her employer to find an attorney. Several weeks ago, she brought her mother, Lori Vajda, into the loop. While Vajda says she prepared both her daughters for the financial challenges they’d face at college, the idea that one of them would get saddled with a friend’s student loans (and that the financial industry would allow a student do this) never occurred to her.

“It floored me,” she says. “If she had wanted to get a credit card or mortgage on her own, she would not even be able to qualify without a reliable source of income.”

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Gorshow’s current plan? If her friend doesn’t pay, she’ll let the loan go into collections, try to make a deal with the collection company and then attempt to sue her friend for the money and damage to her credit score. In the meantime, though, nonpayment of the loan is damaging her credit.

Lesson learned: By co-signing a loan, you are agreeing to be responsible for it if the primary borrower doesn’t pay. That means you’ll share the collection calls and the credit damage.

“No matter how good of a friend you think you’re being, or how close you two are, it’s not worth it,” Gorshow says. “I thought we would be friends forever. She was like a sister to me. …You never know what’s going to happen and how people could change. It’s not a risk you should ever take.”

As for parents sending their children off to college, add co-signing dangers to the life advice you impart. There’s a lack of information on students co-signing for students, Vajda points out, so it’s probably not on most parents’ radars. While co-signing a friend’s loan isn’t one of the life-threating disasters that keep many parents up at night, it’s certainly “quality-of-life-threatening,” Vajda says.

“As a parent, you can only do so much to prepare them for the future,” Vajda says. “This is the time in her life where all her hard work has paid off and she’s launching herself, and now she’s accumulated all this debt because she thought she was helping a friend.”

My cousin used my card to fuel drug purchases

Even the professionals can find themselves in alarming credit situations.

When Thomas Nitzsche, now a financial educator with ClearPoint Credit Counseling, bought a home in 2007, it came with a “horribly dated circa 1936 bathroom, and not the cute kind,” he says.

Money was tight, so he followed the suggestion of his aunt and uncle and hired their son (his cousin) to renovate it.

“I had known him since I was a child and assumed it was a good recommendation,” Nitzsche says. And so, he gave his cousin his Lowe’s credit card to make any purchases necessary for the remodel.

The remodel dragged on for months. One day, Nitzsche opened the mail to find a credit card bill from Lowe’s with $700 in charges – all in denominations of $100.

“I questioned my cousin about it on the phone, and it came out he had been purchasing gift cards to sell on the street and, in turn, purchase drugs.”

Nitzsche cancelled the card, fired his cousin and reported the incident to the issuer. In order to designate the $700 (which he could ill afford) as fraud, he had to allow the issuer to press charges against his cousin.

“As it turned out, my cousin was on probation and had an extensive record, so he was arrested,” Nitzsche says. “Amazingly, he had the gall to call me and blame me for his problems, saying that I shouldn’t have reported it.”

Nitzsche made a payment to his cousin for the work done and hired someone else to complete the job.

Lesson learned:
Don’t trust anyone with your card, Nitzsche says, and keep all personal information secure. In addition to his own situation, Nitzsche has seen the aftermath of familial fraud while counseling at ClearPoint. In many cases, the victims are unwilling to press charges against family and sometimes shoulder the debt themselves.

“Very sad, especially in cases where it was apparent financial abuse against a senior,” he says.

My husband ran up my cards and drained my savings

Inspired by her own story, attorney and author Valerie Rind has since collected relationship-related financial nightmare stories and published a book called “Gold Diggers and Deadbeat Dads.”

Rind’s story began when her husband lost his job and opted to start his own business. Because he’d supported her while she was in law school, she was happy to loan his business $15,000. Then, over the next few months he asked for more than $30,000 in bits and pieces, eventually wiping out Rind’s life savings.

Later, her husband mentioned that he was having trouble getting a credit card for his business – so Rind added him as a user to her own account. He ran up $8,000 in debt.

What eventually caused Rind to file for divorce, however, was what she saw as an even bigger betrayal: Her husband told her when they were married that he owned his condo. In reality, he was merely renting it – and the asset that Rind had been factoring into their financial future was merely an illusion.

“I looked at the real estate records and it flipped a switch for me,” she says. “Get out, it’s over. The loss of money was just collateral damage. You can earn more money. Rebuilding trust, not so easy.”

Her ex-husband eventually repaid the card debt, but Rind has yet to see the return of her life savings.

“Even though that debacle happened years ago, I still get angry at myself,” Rind says. “And I get angry at him for thinking he had to impress me with his apparent wealth and for hiding the fact that his business wasn’t successful. Sure, lots of lessons learned but I’d have been happier not to graduate from that school.”

Lesson learned: If your spouse is a business owner and wants to draw upon your good credit, it can be hard to say “No.”

At the very least, “Stay involved,” Rind says.

“Even if you don’t understand the technical intricacies of their business, you need to understand the financial aspects,” she says. “Look at the business plan. Get periodic updates on assets, debts and cash flow. Ask lots of questions.”

Meet with an accountant if you have trouble understanding the business’s financial workings, Rind recommends, and consider helping your spouse find other funding sources so that your credit and assets aren’t on the line.

Did a relationship leave you with credit or money woes? Rind is collecting anecdotes for a new book. Names and personal details will be changed to protect your anonymity. Contact her at [email protected]

I went to school like I was “supposed to” and got saddled with debt

Melanie Lockert’s story might seem chillingly familiar to other young adults.

After attending her dream graduate program, Lockert found herself unemployed and $81,000 in student debt (combined undergraduate and graduate debt). After barely scraping by in New York and trying unsuccessfully to find regular work after a cross-country move to Portland, she started writing about her debt problems and solutions at DearDebt.com. She’s now also a freelance writer.

Lockert’s blog details ending up in the ER without insurance, using food stamps and spending every spare moment scouring job sites (and landing less-than-ideal jobs).

During that time, Lockert says she wondered if following the prescription of getting an education at any cost was a mistake.

“I felt like I did everything I was supposed to,” she says. “Work hard, go to school, and then I was struggling more than I ever had previously.

Lockert now has just $17,000 left to pay down and has increased her income enough to move up her debt-free date from 2017 to early 2016. But she still remembers her outlook when her debt was still crushing.

“Having such massive debt while barely being able to get by was frightening,” she says. “I was scared and felt really alone.”

Lesson learned: Taking on student loan debt does not guarantee employment.

“It can be a risk, with little reward in some cases,” Lockert says.

And don’t forget the interest – at its worst, the interest on Lockert’s loans cost her $11 a day (a lot when you’re underemployed).

But debt taught Lockert a more uplifting message as well.

“I had let my debt define my self-worth, which is never a good idea,” she says. “Now, I try to remind people that your self-worth is not your net worth.”

Thieves tried to charge $14k worth of vitamins on my card, and law enforcement didn’t care

Greg Scott, author of data breach thriller novel Bullseye Breach, was working as an independent software consultant with his own company in 2011. One day, he was buying equipment for customers with his U.S. Bank card, when the card was declined.

After contacting the bank’s fraud department, he found that someone had attempted to charge more than $14,000 on his cards.

Scott himself wasn’t out the money (the bank’s fraud detection flagged and rejected the transaction) and was sent a replacement card. But he tracked down the details of the attempted transactions (each for several thousand dollars from an online vitamin and dietary supplements company). After calling the merchant, he learned that the bad guy had attempted the same thing with several other stolen card numbers – and got a name, address and phone number associated with the above charges.

Scott then contacted the FBI and, at their request, sent the information he’d gathered. After a few brief responses that the case had been assigned, he heard nothing more.

Lesson learned: Don’t expect law enforcement to pursue identity theft. Scott is still disturbed that an attempted theft of $14,000 (not to mention what the thief may have successfully stolen with other compromised cards) would go practically ignored.

“I learned that law enforcement is useless with credit card fraud and identity theft cases,” he says. “Local police departments have no jurisdiction outside their areas and the FBI is apparently too busy or doesn’t care enough to go after these crooks.”

The good news — card issuers generally shield cardholders from fraudulent charges, meaning you’ll generally be credited for any purchases a thief makes.

“So all I lost was time and aggravation tracking down details for a law enforcement agency that didn’t care,” Scott says.

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