No one wants to deal with credit issues following the death of a spouse, but widows need to be aware of certain financial realities.
One of the hardest experiences in life is losing your partner. Becoming a widow comes with a great deal of emotional hardship.
Unfortunately, widows are also likely to experience financial setbacks as well. According to Government Accountability Office, widows, on average, lose 37% of their household income. On top of that, there might be credit consequences associated with becoming a widow.
The degree to which becoming a widow affects credit depends on your situation prior to the passing of your spouse. Here are some things to keep in mind.
Have You Established Your Own Credit History?
The biggest impact to your credit is likely to come if you don’t have your own credit cards. If you’ve been an “authorized” user on your spouse’s cards, but never established cards in your own name, that can be problematic. Those accounts will be closed after your spouse’s death, and you won’t be able to access the credit–and you won’t have your own credit history to rely on to get new lines of credit.
Unfortunately, some couples don’t think about each person needing a separate credit history. If you’re an authorized user, you have your own credit card, and it’s possible for you to reap the benefits of the account. However, it’s important to realize that you aren’t building your own credit in this situation, and that can hinder you later.
What About Joint Credit Accounts?
If you had joint credit accounts, you can have your spouse’s name removed (with proof of death), and see if you can keep the account open if it’s been helpful to your credit. All the history of a joint account is your history, too, so it can help you maintain your credit score, since you’ll still have the same utilization and age of credit.
In some cases, though, even though the account is joint, you might not be allowed to keep it after the co-signer passes on. If your joint account is closed, that reduces your credit utilization and can also impact other factors that influence your credit, including the age of your credit.
Opening New Credit Accounts as a Widow
You might need to open a new credit account after your spouse passes on. The easiest account to get is a credit card account. However, if your own credit history is limited, it might be difficult to qualify for the best deals. Additionally, it can take a while for your own history to be established after the passing of your spouse.
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For the most part, though, if you have your own credit history established for at least five years prior to your spouse’s death, becoming a widow shouldn’t have a huge impact on your credit. This is one reason it’s so important to consider building your own separate credit history during marriage.
Credit Card Debt After Death
Many widows wonder what happens to credit card debt after death. Your first step when you become a widow is to request your spouse’s credit report to find out what debts there are. Find out which accounts need attention, since you or your spouse’s executor will need to notify creditors.
Then, you need to follow up to see if you’re actually responsible for any of the debt. In many cases, if you’re an “authorized user” but it’s not a joint account and you didn’t co-sign the application, you probably aren’t responsible for it. There might be exceptions, though, if you live in one of the community property states:
- New Mexico
Alaska is also a community property state, but it requires an opt-in upon marriage for community property laws to apply.
Even in a community property state, though, there might be a way to get around responsibility for your deceased spouse’s credit cards debt. Consult with a knowledgeable lawyer before you commit to discharging debt that might not be yours.
For the most part, the deceased’s estate is responsible for paying off creditors. However, some assets that pass to beneficiaries outside the will, such as life insurance policies and retirement accounts, aren’t usually considered for the repayment of credit card debt. Find out which assets are sheltered from creditor efforts, and avoid making promises of payment for debts until you settle whether you’re actually responsible.
If the account is a joint account, you are responsible for the debt. By co-signing, you’ve promised to pay the debt. So, you’ll have to keep making payments if you want to avoid negative credit consequences.
In some cases, even if you are responsible for the debt, you might be able to work out a debt settlement agreement or get credit card debt forgiveness if you can prove economic hardship after your spouse’s passing. Examine all your options before moving forward, and make sure you understand the impact on your credit. Debt settlement can sometimes negatively affect your credit score.
What to Do If You’ve Been Reported to Credit Bureaus
Unfortunately, even if you’re only listed as an authorized user and not responsible for your spouse’s debt, some creditors and debt collectors will come after you anyway. They might even report you to credit bureaus, destroying your credit score.
When this happens, it’s important to understand your rights. Here are two things to remember if creditors are trying to get you to make good on the debt.
- Proof of debt: Creditors must be able to produce documentation showing you’re responsible for the debt, including a credit application co-signed by you. If they don’t have that, you have case to require them to stop trying to collect on your deceased spouse’s debt.
- Comptroller of the Currency: If you’ve been reported to the bureaus for non-payment and it’s impacting your score, you can dispute it with the credit bureaus, asking them to remove the information. You can also get the issue fixed by going through the office of the Comptroller of the Currency, which can force creditors to properly report information.
Hopefully, you won’t be reported for debt that isn’t yours, but it’s a good idea to monitor your credit report and make sure you aren’t being penalized for debt that’s not yours.
Watch Out for Credit Scams
Finally, you need to be on the alert for scams. You might be contacted by a scammer claiming that your deceased spouse owes them money. These fraudsters prey on grief, and bank on the idea that many widows might not be deeply involved in family finances. They might try to trick you into believing that they can take your home, or that there is some other way they can claim part of your assets.
You also have to watch out for fraudulent new lines of credit being opened in your spouse’s name. After scanning the obituaries and getting information about the deceased, scammers might open lines of credit in their name. In order to reduce the chances that they will succeed, get copies of the death certificate and have them sent to the credit bureaus, asking for a deceased alert. Copies should also go to the IRS.
No one wants to deal with these credit issues on the heels of such an emotional blow. However, financial realities can’t be ignored by widows. Take the time to build your own credit history while your partner is still alive to reduce credit problems later. And, after your spouse passes, take steps to make sure that you aren’t taken advantage of by creditors or scammers.