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Is Mr. Wrong Mangling Your Credit?

My wife and I have a question regarding her credit report, and we thought to write to you as we read your columns regularly. She was divorced 10 years ago and found out that her ex had much debt not admitted to during the marriage. Unknowingly her name was attached to the accounts as a joint owner.

They came to a "gentleman's agreement" about dividing the bills instead of getting it documented as part of the divorce settlement. She paid off her "half" -- but you know where this is going. Much debt was not admitted to and, subsequently, not paid off by Mr. Wrong.

For years the bill collectors called and her credit rating tanked. Then we hired a big gun attorney who went to bat for us. Over the ensuing years, we've had hardly any problems. Her latest credit report has a very good credit score -- up in the low 700s -- although there are multiple nasty remarks (essentially characterizing her as a deadbeat).

Just in the past few weeks, though, a couple of "bad debt" collector types have made inquiries into her credit files -- just at a time when we are trying to refinance our home.

My credit is stellar, and we have been able to get a big house, new cars (at 0% financing), 0% credit card offers -- all because we use me, only, as the credit source.

So, the short of it is: Are the collectors just fishing and it is a coincidence that it comes at the same time we're trying to refinance? Or is there some evil coming our way that we must guard against with the lawyer? -- Haunted by past loves

Ah, the ghosts of debts past ... Your wife and her ex may have called it splitsville long ago, but banks aren't as quick to recognize that her financial union went awry.

I'm sorry to say that a "gentleman's agreement" is about as good as divorce court assigning the accounts to one party. Neither the handshake nor the divorce decree is recognized by an unpaid lender. The bottom line for banks: They want to get paid.

Now that the entire country has access to free credit reports from the major reporting agencies, I wonder how many people are discovering the remnants of past financial unions in their files.

The only way to effectively excise those old joint debts is to close the accounts and move the balances to a new one in his name only. Of course, the ex needs to cooperate to get this done, which isn't always easy. Still, that's the place to start.

The debt collectors that are popping up may indeed just be coincidental. Collection companies buy and sell portfolios of deadbeat customers. So this sniffing around may simply be the result of Dawg, The Debt Bounty Hunter, acquiring new prey. Some accounts in which she is listed as a co-applicant with her ex may still be floating around. If that's the case, she may be fair game. (If she's simply listed as an "authorized user," she's not responsible for the payments and should have her name removed from the account.)

Since you haven't heard any rumblings in a while, this may be a so-called "zombie debt" -- old charged-off accounts rising from the grave, making their way back into your nightmares. If that's the case, admit to nothing. Get the details. (Is this an old account already dealt with? A new one?) and run it by the lawyer who is familiar with your case. State laws vary, but in most places you are responsible only for debts that were incurred during marriage. (There are exceptions, such as debt for family medical necessities or education for a child during divorce.)

You also need to check the expiration dates (here's a rundown) on those debts. Most stuff can only be reported for seven years from the date of the first blunder. Although sometimes renegotiating the terms of the debt re-ages the account, adding years to the statute of reporting limitations. Before contacting the collection agency, see if the debt's legit and inside the statute of limitations.

I've written a bit on this topic in the past ("Is Your Ex Wrecking Your Credit?"), and Credit.com's learning center outlines several options for debts after divorce, including the one unpleasant, but most-effective way to separate conjoined debts -- pay it off.

Finally, I'd also caution against using only your name on all of the loans. Your wife needs to establish credit in her name, too, which will give her score a boost and not make you -- as a couple -- so dependent on just your file.

Here's a sharp wooden stake -- best of luck in your financial exorcism.

Dayana Yochimis the author ofCouples & Cash: How to handle money with your honey. Got a couples cash conundrum? Email her at DayanaY@fool.com. She can't answer all questions personally, but it might help just getting it off your chest. Sure is cheaper than couple's therapy.


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