How a Spouse’s Death Can Affect Your Credit Score

“It’s just the way things were,” says Kate Bulger, vice president for business development at Money Management International, a Texas-based nonprofit debt and credit counseling network.

Spouses already suffer an average 11 percent decline in income when they are widowed, the Federal Reserve Bank of Chicago has found, and that burden is primarily borne by women, who make up the bulk of surviving spouses.

Bulger recounts the story of a client who was turned down for a loan after her husband died. Further investigation showed the woman’s credit score had dropped when she failed to pay a second mortgage that she didn’t know her husband had taken out. Ignoring foreclosure warnings because she assumed they were mistakes, she barely averted losing her home. 

“There were lots of things about her financial situation that she was just blind to, because he had taken care of the bills,” Bulger says. “There was no malice about it. It wasn’t purposely hidden. He just was the one who handled the bills and made financial decisions.”

‘It goes from bad to worse’

In a situation like that, the widow “hasn’t had an opportunity to build her credit,” Bentley says. “We see that a lot.”

But applying for new credit cards and loans in their own name, triggering a step called an inquiry, can paradoxically cause a further decline in a credit score, resulting in less favorable terms. So can failing to pay bills, something Moulton says often starts even before one spouse dies, when the other may be distracted by their partner’s illness or incapacitation.

“The mistake is that people are scared and don’t know how to take control of a bad situation,” Bentley says. “They don’t return calls to creditors. They don’t talk to the collection agencies. So, their credit isn’t only bad; it goes from bad to worse.”

Then, after a partner dies, people who are already in mourning find their credit cards canceled, even if they were authorized users, because their partners were the principal cardholders.

“Not only have they lost their spouse, but this thing that feels so disconnected from their spouse is also being lost,” Bulger says.

“There are a lot of emotional hurdles,” says Helene Reynaud, senior vice president of housing initiatives at Money Management International. “You have to get into your spouse’s computer, find his passwords. That gets super emotional.”

Making matters worse, that’s when scammers often start to call, Reynaud says. “As soon as the obituary goes online, there will be people trying to sell you things,” she says.

By the time people seek help, says Bulger, “they’re angry at their creditors. They’re angry at the world. They’re frustrated. All of our financial systems are bureaucratic, and they are not designed for people who are undergoing a great deal of trauma and stress. There is just no forgiveness in our systems for that.”

Yours, mine and ours

Couples can avoid some of these posthumous pitfalls by sharing financial responsibilities — for example, having bank accounts and credit cards in their own names (with the other spouse as an authorized user); putting both names on mortgages and lines of credit; and sharing financial information with each other and their children to make sure bills keep getting paid in times of crisis.

Bulger says she’s already seeing these behaviors take root in families she works with: “More and more, we have a ‘yours, mine and ours’ approach.”

If a mortgage was in just one spouse’s name and that spouse dies, Bulger suggests finding a housing counseling agency certified by the federal Department of Housing and Urban Development for help requesting a mortgage modification.

And check your credit score for any changes. Many banks provide credit scores for free to their credit card customers. You can also get them from the credit bureaus Equifax and Experian, which compile the credit reports on which the scores are based, by signing up for free accounts through their websites.  (The third major credit-reporting bureau, TransUnion, charges for access to credit scores.)

Even later in life, when they don’t anticipate making big purchases such as houses, people need good credit scores, Bulger says. “Credit scores are used in so many things that aren’t just taking out a big new loan,” she says. “They might still buy a new car or change utilities or change cable TV providers, or they’ve been through a disaster and they’re applying for a government program.”

Dolores Tighe was relatively lucky. Her daughter, an accountant, straightened out her finances and took over managing her bills.

“She has been my lifesaver,” Tighe says. “I was so naive about what we had and didn’t have. If somebody passes away, you don’t know what you’re good for and not good for.”