Marriage and Credit Scores: What If the Worst Happens?

We recently got an interesting question from a reader named Kathy. Even though I’ve written many articles about credit over the years, this particular issue has never come up.

I wasn’t quite sure how to answer. So, I went digging to find answers for this reader, and wanted to share them with you, too.

Here’s the question:

“I have a topic I’d like to know more about. It dawned on me when needing to check my credit score that my husband and I have different scores, and we also have some accounts that are in his name, and I use the card, such as a long term Discover account.  Should something happen to him, how does this affect my credit score and should I be establishing my own account with a card I particularly like to use? I guess this would apply to any accounts we have, such as tv and internet. It would be terrible if your spouse passed away, and find you suddenly have rotten credit because joint accounts went away. How does this work? Thanks, Kathy”

Kathy’s question sent me down some rabbit holes with additional questions of my own, including:

• What’s the difference between an authorized user and a joint account holder in practical terms?
• What happens to an authorized user’s credit score after the account holder is deceased?
• How do other accounts, like TV and internet service accounts, factor into this equation?
• What’s the best way for spouses to protect one another when making these decisions?

Before we dive into those questions, let’s get one underlying issue out of the way – how does marriage affect your credit score?

You Each Have Your Own Credit Report

My husband and I married fairly young, in our early twenties. Because of this — well, and partially because we didn’t know there were any other options — we’ve always shared accounts.

We hold a common checking and savings account. If we take out a credit card in my name, we add him as an authorized user and vice versa. The mortgage and auto loan are in both of our names.

In fact, the only accounts that don’t show up on both of our credit scores are our student loans. So, it seems like our credit reports should basically be the same. But that’s not the case.

Our scores tend to rise and fall in tandem. A late payment or paid-off credit card will affect both of our scores. But since we don’t share a credit report, the effect isn’t exactly the same. For instance, my husband’s credit tends to be slightly higher than mine because he took out student loans, our oldest accounts, a couple of years before me.

After all, credit scoring is highly personal and depends largely on your own mix of credit factors and history.

Related: 5 Ways to Build Your Credit Without Going In the Hole

This is one myth many couples believe, though. They think that since they’re sharing all the accounts, they have a joint credit score. But this isn’t the case.

Your scores may be built with the same building blocks. But the credit reporting bureaus will still maintain separate files for each of you.

This means that when you’re making credit decisions, you need to consider how they’ll affect both of your credit scores separately.

Now that we’ve gotten that out of the way, let’s look more closely at Kathy’s actual questions.

Two Different Ways to Hold Joint Accounts

One thing Kathy hints at is that she uses her husband’s Discover account. If she’s merely using a card that has his name on it, that’s not showing up on her credit. And not getting those points for responsible credit card use could be a problem in the future.

Kathy has a couple of different ways to add herself to this account, though:

• Authorized User: This is normally my husband’s and my tactic, though it’s not the best option for everyone. Authorized users are able to access the credit of the card holder. But they don’t have any legal responsibility to pay the bill. Authorized users typically get a separate card with their name on it. The account activity will usually — though not always — show up in their credit report, as well.
• Joint Account Holder: A joint account holder for a credit card is similar to a joint account holder on a checking account. You both have liability for and access to the account. In this case, both credit histories get updated, as well. Sometimes creditors will also refer to joint account holders as co-signers, though this isn’t the case with all creditors.

Most creditors allow for card holders to add authorized users, but not all allow for joint account holders.

What Happens If a Card Holder Dies?

Either of the above options could help Kathy get her husband’s Discover account — and their responsible use of it — added to her credit report. But she’s thinking about the future here and wants to know which option will best protect her credit in the event of her husband’s death.

Figuring out what happens to credit card debt and credit records in the event of a death is tricky, to say the least. In some states, debts incurred during marriage may be considered community property. This means Kathy could be liable for the debts, even if her name doesn’t appear anywhere on the account.

In most states, though, only joint users are responsible for credit card debts. They’re paid from the deceased’s estates. Or if the estate can’t pay the debt, the creditor writes it off as bad debt.

However, the way that this will affect you and your credit depends on your connection to the account. Here’s what my research said:

For Authorized Users

As an authorized users, you shouldn’t be held responsible for the balance on a deceased person’s credit card. (Again, though, this could be different if you live in a community property state.)

When the account is paid off or written off, the most likely option is that the credit card company will close the account. Then, it will likely show up as closed on your credit report. If the account was in good standing, it will appear on your credit report for about 10 years.

What happens if the account had to be charged off because the estate couldn’t pay the debt? In this case, the negative history could still appear on your credit report. But you may be able to get the record removed altogether. If the negative record appears on your report, call the credit reporting company to try to have it removed.

In some cases, you may have the option to transfer the credit card to your name.

Resource: The Bottom Line Impact Credit Inquiries Have On You

Talk to a specialist in the credit card company’s customer service department. They may allow you to assume any balance due and then transfer it to your name.

This isn’t always an option, and it’ll leave you liable for any debt associated with the account. But it could also keep a strong history on your credit report.

One thing is certain, though: if you’re an authorized user, you should not use the card associated with this account after the account holder’s death!

Since the account should be closed after this person passes away, this could be considered fraudulent. This is the case even if you’re spending on funeral and end of life costs. It’s best to consult with an attorney before using an account on which you’re only an authorized user once the main account holder has passed away.

For Joint Account Holders

If you’re a joint account holder, the situation gets much more streamlined. You’re responsible for making the payments on the credit card balance. But you also get to keep it as part of your credit history.

Different card companies will have different procedures. But Discover notes that if you’re a joint account holder, the card in your name will still be active. You’ll just become the primary account holder.

Resource: Credit Reports vs. Credit Scores: Do You Know the Difference?

What Does All This Mean?

So what does this actually mean for Kathy? A couple of things:

• If she wants to keep the good credit history with the Discover card, she should become a joint account holder. This will ensure that the Discover card’s history will count on her credit report, even if her husband passes away. As long as they’re good about paying off their balance each month, this is a good thing.
• She could also become an authorized user for now. If for some reason Kathy can’t become a joint account holder, her husband should at least add her as an authorized user. This can start building Kathy’s credit to the point where she can take the next step we’re going to discuss.

The Importance of Personal Credit

If Kathy doesn’t currently have any credit card accounts in her own name, now is the time to start building her personal credit. This can happen in a few ways, depending on the situation.

If Kathy has good credit already because of her joint credit accounts with her husband, she may want to open one or two credit cards in her own name. Alternatively, she could, again, become a joint account holder on the Discover card. (This would actually be idea, since it sounds like that account has been open for a while.)

Kathy should use those cards responsibly, of course. Over time, this will build her credit record separately from her husband’s accounts. Then she’ll be on solid credit footing even if he passes away. She can always add her husband as a joint account holder or authorized user if it’s convenient for him to carry a card for these accounts, too.

If Kathy doesn’t have good personal credit, she might start by becoming an authorized user on the Discover account. This could help boost her score over the next few months. Once her score is higher, she can apply for her own credit account, as noted above.

Learn More: Does Being an Authorized User on a Credit Card Improve Your Credit?

What About Non-Credit Accounts?

Kathy asks about accounts like the TV and other utilities. What will happen to her credit score if her husband dies with these accounts solely in his name?

As it turns out, not much.

Utilities companies don’t normally report to credit reporting bureaus. So, those accounts aren’t actually part of your credit report, anyway. They’ll only wind up on your report if the account goes to collections, at which point it becomes a debt. (And not a good one!)

With that said, utilities companies do care about your credit report. You’ll have a hard time opening new accounts if your credit score is terrible. And dealing with utilities — even paying bills — can be tough after the death of the sole account holder.

Learn More: How to Bring “Shock and Awe” to Your Monthly Expenses

This is why it’s a good idea to hold utilities accounts jointly, whenever possible. Kathy’s husband should call the companies of the accounts in his name to see if he can add Kathy to the account.

At a very minimum, Kathy and her husband should both know when, where, and how to pay these bills. That way if something happens to one of them, the accounts won’t get shut off or go into collections due to lack of payment.

How Can Spouses Protect One Another?

I’ve got a few takeaways from the research on Kathy’s question, including:

• Keep your account balances low. One reason it’s so important to be responsible about your debts is that if you die while balances are still high, someone has to deal with the mess. Even if your husband or wife isn’t technically responsible for your personal debts, your estate may be. This can throw a wrench in their financial future, for sure. So work to maintain low account balances whenever possible.  If you have high balances and could use some interest free time to pay them down, consider a no fee balance transfer credit card.
• Give your spouse access. Even if your spouse isn’t added to all of your accounts, he or she should have access to them. Not only does this prevent damaging secret-keeping, but it also helps them manage in the event of your death. Take time to compile a digital or physical book of all of your accounts — joint and personal — and payments. Share these documents so you’ll be prepared should the worst happen.
• Work on personal credit. It’s easy to drift into the “what’s yours is mine” mentality in marriage, because usually that’s true. But with your credit, it’s essential to maintain your own credit history, as well. It’s a good idea to have at least one credit card in your own name, even if you’re joint account holders on most of the big installment loans (like the mortgage and auto loan).

Related: What Kind of Mortgage Does Your Credit Score Qualify For?

Do you have any other tips for Kathy, perhaps from your own experiences? Share them below!

Topics: Credit

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