Starting a credit life after a spouse's death

Establishing credit after a spouse diesEstablishing a credit history can be difficult after a spouse dies, especially for women whose husbands handled everything. Losing a life partner can be one of the most devastating events in a person's life. Imagine how much more difficult it would be to have to reestablish your credit life on top of that.

"This is a tragic situation," says Bill Christie, a retired financial adviser and personal accountant. "I can't count how many times I've advised women to build their own credit during marriage, even if the husband earns a higher salary or she's a stay-at-home mother. Establishing a solid credit score of her own during marriage saves some stress if and when traumatic times happen. Then she's prepared to face the world."

Does this mean she can't establish herself after her husband dies unexpectedly? Christie says it's a bit more difficult for some things, especially for the elderly. "Unless the husband left her with a huge inheritance, which isn't very common these days, or was smart enough to make arrangements for her, she may have some difficulty starting from scratch. And for older widows, a lot of credit establishments tend to think of the elderly as 'high risk' since they have a fixed income and their life expectancy after a spouse's death is low."

The worst part is that, depending on the provincial or state laws where the widow resides, she may also become responsible for her deceased spouse's outstanding debt. There are ways she can work through these tragic times and rise above them. Here are a few ways Christie says she can help herself:

1. Get to a probate lawyer. This is a crucial first step. Find a lawyer who's willing to sit down for a free initial consultation (many out there will do this, especially for the elderly). Bring all necessary papers, documents, a list of creditors and your spouse's will, if available.

2. Contact creditors. If your spouse was loyal with his payments and kept current, it shouldn't be a problem getting the accounts closed and cleared from your name. If he was in arrears or owed a great amount to any one place, the creditors may try to fight for payment. In the worst case scenario, be sure to have that lawyer's name you spoke with above. There are always ways to work these things out. The most important thing is to clear your name so establishing your own credit will be easier.

3. Get credit scores. You may not be able to obtain a copy of your deceased spouse's scores, but you should contact the credit bureaus to advise them of your husband's death. Then, get copies of your own credit scores to ensure your name hasn't been dragged into any bad debt your spouse may have had. Christie highly recommends this step. "Getting these documents will also show...if she had joint or authorized permission to use any of the accounts. Then she can simply contact these places to see whether she'd be able to assume them under her own name."

4. Start with the mortgage. The surviving family members shouldn't have to reapply for the mortgage. Usually such family, especially a spouse, is permitted to assume the mortgage. She becomes responsible for those payments, however, so she needs to be sure she is able to make them. When this is possible, it puts the spouse on the right path to establishing her own solid credit history, as long as she continues making the payments on time.

5. Set up some form of savings. There are many options for savings accounts these days, from regular savings to high interest accounts at regular banks, and even ING. Christie says this is probably the most important step a spouse can make. "I can't stress it enough. This is a step one probably should have taken throughout the marriage to have funds to fall back on. But it's never too late. Even with a lower income, setting even $50 per cheque aside gives her something to fall back on when she gets into tough times again. Plus, having some money stashed away shows potential creditors you are serious about money and can save, too."

6. Don't apply for too much credit. As with anyone, applying for too much credit too fast doesn't look good. Each time you apply, it shows up as an inquiry on your credit report, so only apply for credit cards you really need. As Christie says, "Two credit cards maximum, and some sort of line of credit. That should be good enough."

7. If you need it, get some help. In certain situations, one of the smartest things a widow can do is have someone move in and help out with the bills. It should be a trusted and responsible family member or friend with a job and his or her own separate credit history. "Reducing the amount of money that has to go out each month will mean more money left over for her," Christie says. "And there's nothing wrong with help like this to get through the initial tough times of losing someone until she gets back on her own two feet."

Establishing credit after a life partner dies can be a daunting task on top of everything else that goes on during such a tragic event. But it's important the surviving spouse prepares herself and gets on the right path so she can go on with dignity.

Written by Lily Wolf.

Published August 17, 2009

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