Imagine you’re applying for a new home loan, or about to buy a car. You’ve got great credit, or so you thought. And then the loan officer comes back with the bad news. You’ve been rejected.
The reason: You have no credit score. Why? You’re dead.
Standing there clearly alive, unfortunately, is not enough to remedy a situation that thousands of Americans find themselves in every year. The federal government has estimated that 14,000 people a year are erroneously added to the Social Security Death Index, a widely used database often cross-indexed with other databases to try prevent the use of actual dead people for fraudulent purposes. In addition to being mistakenly included on the government list, there are also other ways to become dead when you are not.
Most common is the situation that starts with something rather routine: a husband and wife possess joint bank accounts or share credit cards. The routine can become a problem when one of them dies and is supposed to be removed from the account, said Clifton O’Neal, vice president of the credit reporting bureau TransUnion.
“If it does happen, it is usually the result of a joint credit card or joint account of some type,” he said. While it doesn’t happen often, O’Neal said, when it does occur it’s likely due to someone at the bank or credit card company erroneously noting the wrong spouse is dead.
It’s the sort of problem that could be caught early, but most people who are dealing with the death of a spouse likely will have so many things to deal with that being proactive and getting their free credit report or obtaining a free credit score is not likely to be high on the list. But credit experts say that it should be part of the routine when a spouse dies.
“A good rule of thumb in these cases is to not only request a copy of the deceased spouse’s credit report once things have been cancelled, but also obtain a copy of their own report to see if any updates were misreported,” O’Neal said.
Every consumer is entitled to one free credit report a year from each of the Big 3 credit reporting bureaus (TransUnion, Equifax and Experian) through the website AnnualCreditReport.com. And, when credit is denied due to something in the report, the consumer is also entitled to a free copy.
O’Neal noted that in order to get the deceased spouse’s records, the surviving spouse must submit a copy of the death certificate and a document showing that they have power of attorney. If a mistake is found, being erroneously declared dead being one the larger potential errors, O’Neal said the consumer should immediately begin the dispute process to correct errors on their credit report.
A dispute can be lodged online, by phone, or through the mail, but O’Neal suggests doing the dispute online because it will allow the process to be monitored. The Big 3 credit bureaus enable consumers to file disputes through their websites.
A byproduct of the erroneous credit report death is what happens to your credit score. You no longer have one. And that can cost you not only the chance to get the best credit cards or a low mortgage rates, but any credit cards or any mortgage.
“If a death notation is in a credit file, that file can’t be used to generate a FICO score. So someone who is alive but reported dead on their credit report would not have a FICO score,” said Anthony A. Sprauve, senior consumer credit specialist for FICO, the credit scoring company.
If you learn from your credit score — or not actually having a credit score — that you’re mistakenly dead, Sprauve said the next step is to go back to the credit reporting bureau to have the error corrected. The consumer can usually find out at that point where the error was made.
“Once the death notification is removed, a FICO score can be generated assuming there has been some activity reported on at least one account in the last six months,” Sprauve said.
At that point, becoming alive again should reactivate the calculations used to determine that person’s credit score.
“A death notation won’t erase previous credit activity, so the FICO score will be based on any credit activity in the credit report,” Sprauve said.