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Ask Creditnet: Is My Credit Card Reporting Correctly?

Ask Creditnet: Credit Card Advice from Industry Experts

Dear Creditnet: I'm a cosigner on my son's credit card. I know, that may have been a mistake in the first place.

Recently, I pulled my credit report and found out that the account was maxed out, closed in March of last year, and then reported late for six months before he started making payments again. The account status is currently listed as "Pays As Agreed."

I called the credit card company asking why this is listed as closed if my son is still paying on it every month? They said it was closed because they did not want him to use the account anymore.

Is this the correct way to report the credit card on my credit reports, or should it show as an open account with a zero credit limit?

Answer: Your credit card account appears to be reported correctly based upon the information you've provided. Since the card issuer closed the account, it should be reported as "closed" while also indicating the credit limit at the time of closing and the current balance.

Unfortunately, this is a common occurrence these days. Credit card companies are making the decision to close a lot of "high-risk" accounts as they battle to better manage their balance sheets and remain profitable under new credit card regulations. A maxed-out credit card, as in your son's case, is one that will often raise a red flag and get shut down with little or no advance notice.

Even though the card is technically closed and unusable, it's important to remember that you and your son are still responsible for the unpaid balance. A closed or charged-off account does not mean the debt simply vanishes. In fact, your son most likely began making payments again because he reached some sort of payment arrangement with the credit issuer. The result is the current status you mentioned that indicates the account is "Pays As Agreed."

The best thing you can do at this point is talk openly with your son about the credit card account and determine what can be done to help make sure the debt is paid off before the situation gets any worse. After all, you are a cosigner, which means you're legally just as responsible as your son for this account.

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Joshua Heckathorn's picture

Joshua Heckathorn was President of Creditnet, is a credit expert and has been featured on CNNMoney, FOX Business, Yahoo Finance, The Street, and many other national publications during the past ten years.  He received a Bachelor of Science in Management (Finance) from Brigham Young University's Marriott School of Business and earned his MBA from Seattle University.

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