Financial guide for widows: building credit

When used strategically, credit can soften the financial blow

Tamara E. Holmes
Personal Finance Writer
Writes regularly about personal finance and health

Credit rules of the road for new widows

Losing a spouse is one of the most traumatic experiences one can endure. If you are a widow, the emotional toll can be compounded by financial challenges. However, credit can be used strategically to help you get through the tough times and rebuild your life.

Each year, more than 700,000 women in the United States become widows, according to Widows Well, a service that strives to help widows make sound financial choices. For these women, the financial impact can be devastating.

American widows on average face a 37 percent decline in household income when their spouse dies, compared to widowers, who experience a 22 percent drop, the U.S. Government Accountability Office has found.

Carole Brody Fleet learned firsthand how financially devastating a spouse’s death can be when her husband died of amyotrophic lateral sclerosis (ALS), a disease often referred to as Lou Gehrig’s disease, that affects nerve cells in the brain and spinal cord. 

“I was that person where months would come where I had to choose between the payment on my daughter’s braces or making a full mortgage payment,” she recalls.

While Brody Fleet’s story is not unusual, credit can soften the blow.

Using credit to help pay for the funeral

One of the first financial challenges a widow might face is how to pay for her husband’s funeral. The national median cost of a funeral and burial is $7,360, according to the National Funeral Directors Association.

If your spouse had a life insurance policy and you are the beneficiary, you could use the money to pay for the funeral, but you may not receive the proceeds in time for the service.  In this case, credit can tide you over if you pay for the service with a credit card and then pay the card off once the life insurance settlement is disbursed.

Even if there is no life insurance policy, you can charge the funeral costs on a 0 percent APR credit card with a 12- to 15-month promotional offer and take the year to pay off the balance. 

Beware of credit scams targeting widows

Another early challenge for widows is the threat of fraud. Identity thieves have been known to scour obituaries and use a deceased person’s information to open credit card accounts or apply for loans, says Eva Velasquez, president and CEO of the Identity Theft Resource Center. 

To reduce this risk:

  • Send a copy of the death certificate to the Internal Revenue Service.
  • Send a copy of the death certificate to each of the credit reporting bureaus and ask them to put a “deceased alert” on the credit report of the deceased individual.
  • Request the credit report of your husband and review it to see if any active credit accounts need to be closed. The Identity Theft Resource Center offers a sample letter you can download and send to the credit bureaus.

Scammers also are on the hunt for widows who are not accustomed to handling the family finances, Velasquez says. For example, an older widow who didn’t work outside the home might be contacted by a scammer who tells her that her husband owes him money.

"Suddenly I had an electric bill that was two months past due. There are so many things that go on after you lose someone that it's easy to get behind."

To protect yourself, pick a trusted friend or family member and use him or her as a sounding board, Velasquez says. “Let them know, ‘I’m going to need your help while I’m getting through this, and I’m going to have to run a lot of stuff past you.’ Make that your golden rule.”

A widow’s financial checklist

If your spouse has recently died, your finances must become a priority. Take the following steps to protect your credit and get your financial house in order. (Download as a PDF.)

1. Figure out how much money you have to work with.

Gather documents such as bank and credit card statements, insurance plans, mortgage papers, automobile titles and recent tax returns. Also, identify assets such as savings and investment accounts.

If you work, take an honest look at your salary to see whether it, alone, can support your lifestyle.

Determine whether there is a life insurance policy for which you are the beneficiary and contact other potential providers of income such as the Social Security Administration, the U.S. Department of Veterans Affairs or your spouse’s employer.

2. Get a handle on the bills.  

When Christina Polovich lost her husband of 13 years, grief left her in a fog.

“Suddenly I had an electric bill that was two months past due,” she says. “There are so many things that go on after you lose someone that it’s easy to get behind.”

To make sure you stay on track, write down the due dates for all monthly bills, or better yet, set up automatic bill payments so you don’t rack up late fees.

3. See where you can cut expenses.

Update your budget to reflect your new reality, says Martin Lynch, education director for Cambridge Credit Counseling in Agawam, Massachusetts.

If you’re not on your utility providers’ budget plans, enroll in them, Lynch suggests. “You want your monthly budget to be as predictable as possible.”

If you fall behind on your rent, mortgage or other bills, contact your creditors to try to work out a payment plan.

4. Close or convert accounts.

If you and your spouse had joint accounts, send the company a copy of the death certificate and ask that the account be put in your name.

Close any accounts that were in your spouse’s name only.

Some financial institutions may also require you to reapply on your own on previously held joint accounts.

5. Address your spouse’s debts.

Confirm that all debts for which your spouse may have been liable to pay have been satisfied by the proceeds of his or her estate. 

If you live in a community property state, this may be more complicated. There are 10 states that have community property laws: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin and Alaska. (Alaska’s community property laws are on an opt-in basis.)

In community property states, assets and debts that a couple amassed during the marriage may be deemed joint property. That means you could be on the hook for loans or credit card debt that your husband racked up before his death.

If you do end up having to pay off your deceased husband’s debt, transferring the balance to a zero-interest or low-interest credit card could help you to spend less on interest and pay off the debt faster.  

Financial resources for widows

There are services and programs that can help widows regain their financial footing. Here are some resources you may be able to tap.

Resources for elderly widows

An elderly widow is less likely to be working and may have to rely on a fixed income.

Without a salary, elderly widows are more dependent on the assets the family has already built. Medical bills and expensive prescriptions are also a concern for many elderly widows, says Cindy Hounsell, president of the Women’s Institute for a Secure Retirement.

If you’re 65 or over, you may be eligible for Medicare. Widows who are 60 or over may be eligible for monthly Social Security benefits.

Identify other income you may be eligible for, such as pensions, life insurance, retirement accounts and brokerage accounts.    

Resources for widows with young children

When Maureen Bobo became a widow, her daughters were 8 years old and 2 months old and the family had to downsize.

“Widows with children have to look at education and things like music lessons and gymnastics. A lot of things just have to be put aside,” Bobo says.

If you have limited income and dependent children, you may qualify for federal or state assistance programs, Lynch says. There are also organizations that may offer assistance. The Liz Logelin Foundation, for example, provides financial grants to help widows with young children to take care of short-term needs.

Don’t forget to reach out to churches or other organizations you belong to. “Many churches have funds available for parishioners going through events like this,” Lynch says.

Resources for military widows

If you’re a military widow, one of the first places to go for support is the U.S. Department of Veterans Affairs. That agency’s Office of Survivors Assistance can provide you with information about benefits and services for which you may qualify.  

The Veterans’ Wives International Network also can help. The organization will not only point you toward potential resources you may qualify for, but the agency will help you through the process of applying for them.

The Tragedy Assistance Program for Survivors is another organization that offers educational assistance, and can help you to identify potential resources.   

Using credit to build a strong financial future

Some widows never managed the family finances. For example, Chasity Williams found herself struggling to figure out how to file the family’s taxes the year after her husband died.

“He did the financial planning and the taxes so I had no clue,” she says.

She eventually found a tax professional and did a ton of research on her own to get up to speed. Today, Williams helps other widows adjust to their new lives as president of the Hope for Widows Foundation.

"He did the financial planning and the taxes so I had no clue."

Another challenge some widows face is credit.

In some cases, the widow depended on her husband’s credit for loans and credit cards. And for some widows, their husbands may have had the stronger credit history. They may now find themselves having to improve their credit score and apply for credit on their own.

Regardless of what stage of life you are in, credit can be an asset. Not only can a credit card be used for a financial emergency, but widows can take advantage of rewards and other perks that can enhance their lifestyles.

Check your credit score to see where you stand. With a higher score, you will “earn lower interest rates, saving you money,” Lynch says.

To improve your credit, pay your bills on time and try not to let your account balances reach more than 25 percent of the cards’ limits, Lynch advises.

If you have no credit history, applying for a department store credit card or a secured credit card can help you build one.

When shopping for a credit card, look for one that has rewards that fit your new lifestyle and compare the pluses and minuses of each.

For example, you may be choosing between the Chase Freedom vs. Chase Sapphire Preferred card. The Chase Sapphire Preferred card may be the better choice if you want to travel, while the Freedom card could satisfy your desire for cash back.

When your world is turned upside down by a spouse’s death or any traumatic situation, give yourself plenty of time and patience to turn things around. 

“Time may not heal the wound opened by the death of your loved one, but it can give you perspective on your financial options,” Lynch says.

See related: 6 steps to take when a credit card holder dies, Being financially prepared for the death of a spouse, What happens to credit card debt after death?


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Updated: 08-16-2018