Sally Herigstad is a certified public accountant and the author of “Help! I Can’t Pay My Bills: Surviving a Financial Crisis” (St. Martin’s Press, 2006). She writes “To Her Credit,” a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also wrote for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Stewart Radio and other programs.
Dear To Her Credit,
My husband took good care of me while he was alive, taking care of all the bills and all the money. Unfortunately, he’s no longer here with us. Now I’m starting over. Everything on TV says I am going to have a hard time establishing my own credit.
Can I keep my credit cards or do I have to apply for new ones? What about my mortgage? Can you advise me on how to make the process of getting new credit and building my credit history any easier? — Bobbi
You don’t have to reapply or requalify for your mortgage. “This is an issue that comes up regularly,” says E. Alexandra Golden, a lawyer who practices estate planning and elder law in the Boston area. “Federal law (the Garn-St. Germain Act) allows a family member who inherits a house to assume the mortgage. That family member then has the obligation to make the payments.”
Jointly held credit cards are generally treated the same way. “I’ve not had any clients who have had a problem keeping them,” says Golden. “However, depending on your state’s laws concerning whether one assumes the debts of a deceased spouse, and the terms of the credit card agreement, the surviving spouse may risk assuming responsibility for the deceased spouse’s debt. Check with a local probate attorney if you have any questions. These are really important issues, and it’s our job as lawyers to know under the law what legally you’re stuck with and what is the responsibility of the estate.”
Any credit cards that are not held jointly may be the exception. “My first question would be whether she is a co-signer or authorized user on the loans. If she is a co-signer on the loans, then she continues to use the accounts, but will also be responsible for making the monthly payments,” says Jack Craven, president of Debt Settlement USA Inc. “If she is only an authorized user, she should notify the creditors that her husband has died, but that she would like to be able to continue to use the accounts. Most likely, the creditor would then evaluate her creditworthiness through its underwriting process, and make the determination whether or not to allow her to keep using the accounts with the existing credit lines intact, or, if there appears to be no more income because he was the sole breadwinner, perhaps shut off any additional credit, close the accounts and expect the accounts to be paid off.”
Establishing your own credit history shouldn’t be as hard as you’ve heard on TV. In fact, you probably already have more credit history than you think.
For one thing, your creditors on joint accounts are required by law every time they report activity to one account holder’s credit history to also report it on the other account holder’s history. That means that unless your husband was the only person on your bills, mortgage and credit card accounts, which isn’t too likely, you have as much credit history as he did.
Another factor that may work in your favor is that credit scores don’t reflect how much money you make. If only your husband worked, or if he made considerably more money than you did, it makes no difference to your credit score.
Once you have your credit cards and mortgage in your name only, your strategy for building your credit history is simple. Pay all your bills on time, faithfully, over a long period. You don’t need to use your cards more than once every six months or so, and there’s no reason to ever carry a credit card balance. Try not to use more than 50 percent of your credit limit on each card. And avoid too many credit applications, which will show as credit inquiries on your credit history.
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