How Drugs & Alcohol Can Wreck Your Credit

Ask Doug Thorburn whether drinking or drugs can ruin someone’s credit — even if they aren’t using substances themselves — and he immediately shares a story of one of his clients who held a joint credit card with a business partner. There was no balance on the account when this client extinguished the partnership and canceled the card. Six months later, the client got a call from a collection agency about an $80,000 unpaid balance. It seems his former partner, during a bout of drinking and using, had reopened the card and gone on a spending spree. He later committed suicide, leaving Thorburn’s client with a huge debt — and a huge mess.

“I’ve seen other (situations) where they have embezzled money straight out,” he says. An Enrolled Agent and a Certified Financial Planner, Doug was a practicing tax professional for almost 20 years before he stumbled into the field of addiction after becoming romantically involved with an alcoholic. Since then, he has been on a mission to learn about the disease of addiction and share his findings with others. He is the author of several books, including Alcoholism Myths and Realities and the blog AddictionReport.com.

Unfortunately, Thorburn says, most people people involved with alcoholics and drug addicts overlook warning signs until the damage is done. They may “lend” money that they will never get back, or “lend” their good credit ratings by taking out joint credit cards or co-signing loans with someone who will never repay the debt.

Thorburn says there are a number of behavior patterns to look for:

An “I’m God” attitude
A sense of invincibility
Intense mood swings
Blaming others
False accusations
Verbal, social or emotional abuse

“Whenever you shake your head and wonder, ‘What the heck are they thinking?’ I think of addiction,” he says.

Looks Can Be Deceiving

What do you do if you suspect someone close to you is an addict?

If that person is your spouse or romantic partner, Thorburn suggests separating your finances and, if possible, “move out or get them to move out.” And certainly “don’t lend them money,” he says.

But because many people don’t know how to spot the warning signs, they get sucked into what later proves to be a toxic relationship, even though it appears wonderful at first. Wealth and status are not necessarily signs that everything is OK. Some addicts are extremely successful in business, or in professions such as law or sales because, “they need to win at all costs,” he says.

Protecting your credit is essential when you are involved with an addict. That means you don’t co-sign for loans or ever let them use your credit cards. (If you let them use a card once, it will be very difficult — if not impossible — to establish unauthorized use of the card).

If you already share accounts with someone you suspect is an alcoholic or drug addict, it is essential to close all joint accounts and either make a plan to pay off the debt or talk with a bankruptcy attorney. It’s also crucial to monitor your credit, since the addict may feel no remorse about “borrowing” your information to open new accounts or even using your your health insurance or medical information to get prescription medications. (Medical identity theft is a huge and growing problem).

You can get one free credit report from all three bureaus annually and you can use a service such as Credit.com to get your free credit score, updated every 14 days. If it appears your information has been used fraudulently, consider placing a fraud alert or credit freeze on your reports.

“How does this happen?” Thorburn says, commenting on the outrageous stories he’s heard personally and seen in the news. “I don’t ask anymore. Addicts get away with murder.“