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Just When You Thought You Knew Every Way Your Credit Report Could Be Used Against You (A Case Study)Personal Finance


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"Credit Card Issuers" by PT Money on Flickr, Creative Commons licensed

“Credit Card Issuers” by PT Money on Flickr, Creative Commons licensed

Whether we are talking about mortgage loans, credit cards, auto or student loans, most people know that credit reports play an important role in our lives.

And they, like you, understand that having poor credit can impede our efforts to gain financing at competitive rates and terms.

However, as was recently pointed out by my friend John Ulzheimer who used to work at FICO, Equifax and Credit.com and who often serves as a credit expert witness in court, our nation’s lawyers have found a new use for credit report data–divorce proceedings and alimony consideration.

I will let John tell the story:

“Last week I found myself in a courthouse being asked to testify why it is helpful to be an authorized user of a credit card account. This is not a common use of my skills. Normally when I’m in a courtroom setting I’m testifying as to the alleged negative impact of an item on a Plaintiff’s credit reports.

“The back story was this. At a divorce trial, the soon to be ex-wife was asking for a huge amount of alimony from her husband, a senior executive at a major firm, saying she was broke and had no access to credit, since as a stay-at-home spouse she hadn’t worked in years.

“Her problem? She had been added to her new live-in boyfriend’s credit cards as an authorized user which gave her access to the more than $50,000 in lines of credit he had in total on those cards. She could have legally charged up to $50,000 if she wished.

“The fact that she was an authorized user began showing up on her credit reports about 30 days after the boyfriend agreed to authorization. At that point she could not longer suggest that she had no access to credit.

“Normally on cross examination opposing counsel scores some points because rarely is a credit related lawsuit completely one sided. But, on this day it was as close to a shut out as I’ve ever seen. The wife’s lawyer’s sole line of counterattack was that I couldn’t testify that his client had ever used the cards. This is true, but it doesn’t matter. She was claiming she didn’t have access to credit, but the reports from the credit agencies showed otherwise.

“The moral of the story is simple: If you want to convince someone that you don’t have access to credit then you better assume that your credit reports are going to be subject to review by opposing counsel. And while credit reports take a lot of heat as being supposedly loaded with errors, they often tell a very clear story as to whether or not you’ve got access to credit lines. They simply don’t miss much when it comes to relationships with creditors.”

You have been warned.

Originally published on Forbes.com