Deceased cardholder's debts can hurt authorized user's credit score
After a death, who owes can be affected by location, contract type
Ask a question.
Dear Credit Score Report,
My father passed away six months ago. My mother was an "authorized user" on all his credit cards. His estate is in probate. However, the credit companies such as Chase, AmEx and Citi have all placed the accounts listed as "charged off" with the amounts on my mother's credit report. Is this legal? Can she have it removed? Will it hurt her report and score? -- Danielle W.
I'm sorry to hear you're dealing with a difficult financial situation during an already challenging time. Luckily, though, your mother's authorized user status should allow her to have those charged-off accounts removed from her credit report, preventing a drop in her credit score.
After a borrower passes away, his or her estate is typically responsible for any unpaid debts, as directed by the administrator or executor during probate. However, there are cases in which family members or others who shared accounts with the deceased borrower may be partially (or wholly) responsible for their repayment to creditors. If that debt goes unpaid, it could hurt the shared cardholders' credit scores. In this case, since your mother is an authorized user -- rather than a joint account holder -- she shouldn't be responsible for making payments on those credit cards or suffer scoring damage. "An authorized user has permission to use the account to make charges but has no contractual responsibility for payment of the debt," says Rod Griffin, director of public education for credit bureau Experian.
Additionally, some card issuers say they don't report damaging information on authorized card users. American Express, for example, says its company policy hasn't ever allowed the reporting of negative account information, including canceled or past due accounts, on authorized users. "This is how we've always been doing this," says Marina Norville, AmEx's director of public affairs. I also contacted your father's other two lenders, but Chase and Citi didn't respond to my e-mails.
Regardless of whether the banks or collection agencies (which might have taken on responsibility for collecting that unpaid debt) reported to the credit bureaus, those charged-off account notations could still damage her credit score. However, your mother may be able to get them removed from her credit report. Her success depends on several factors, experts say:
- Where she lives.
- How the credit cards were used.
- What she may have charged on those cards.
In 10 states (Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin), community property laws treat spouses who are authorized users as joint account holders. Joint account holders, as you may already know, are equally responsible for the debt on shared accounts. As a result, your mother might be liable for your father's credit card bills if "she lives in a community property state or the debt was incurred for 'necessaries' (i.e., food, shelter, utilities or medical care). Or she might be liable for only those charges that she actually made on the card," Chi Chi Wu, staff attorney for the National Consumer Law Center, says in an e-mail. "In some states, she may not be liable at all," Wu says.
While she may not be liable, those unpaid debts somehow still managed to appear on her credit reports. There's a reason for that, consumer advocates say. "The big problem is that often creditors will try to stick liability for a credit card account on a surviving spouse or other relative, even if she is only an authorized user and is not liable for the account," says Wu. "We have heard stories of significant abuses in this area."
It's possible your mother is a victim of such abuse: If her credit reports confirm her status as an authorized user, it should help her challenge the outstanding debts. "If the accounts indicate she is an authorized user and they include negative information, she can follow the instructions provided with the report to contact Experian and ask that they be removed," Griffin says. The other two major credit bureaus -- TransUnion and Equifax -- also offer borrowers the opportunity to dispute mistakes on their credit reports.
Deleting those charged-off accounts should prevent a drop in her credit score. Otherwise, when it comes to the nation's most popular scoring model, "FICO scores do include in the score calculation any credit cards on which the person is an authorized user," says Craig Watts, FICO's spokesman. "This can benefit the person's score if the card account is in good standing. But when the account is delinquent or charged off, it can lower the authorized user's score," he says. The exact numerical damage will depend on how recently, how severely and how often delinquencies appear on the borrower's credit report. Note that since FICO scores are based on information from credit reports, once the bureaus remove negative account information, FICO won't be able to count it against her when calculating your mother's credit score.
As an authorized user, your mother should be able to protect her credit score. If she is a joint account holder or somehow else responsible for the debt, it may take more than the advice of a humble Credit Score reporter to help her out -- it may be time to look for a good lawyer.
See related: What happens to credit card debt after death, Decade-old credit mistakes shouldn't appear on your report, Who's responsible for a deceased spouse's card debt?, FICO reveals how common credit mistakes affect scores
Meet CreditCards.com's reader Q&A experts
Does a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.
Three most recent Credit Score Report stories: