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Rebuilding Damaged Credit After Your Spouse Dies

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Recently we at Credit.com received a cautionary tale about the lasting impacts of bad financial decisions. Reader Rebecca wrote in to tell us that even though her husband passed away four years ago, her finances still have not recovered from the mess he left behind.

“We were married for 21 years,” and in that time, she says, he ruined her credit.

In an interview with Credit.com, Rebecca told us her husband asked her to apply for a Sears credit card in her name. He charged up to the card’s limit, and never paid the bill. Other unpaid bills stacked up; eventually the family had to declare bankruptcy. The situation became so bad that she took over the family finances altogether, she says, and started to repay their creditors. Her husband became ill and passed away, and she was left to undo the damage.

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She says her credit score is so bad at this point that she can’t even get a credit card from a store like JCPenny. With no ability to borrow, even in times of emergency, she wonders what she’ll do if her car breaks down.

“I just wondered how I can ever get ahead where I can have a little peace of mind just in case something bad does happen,” she says.

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Even though Rebecca is paying her current bills, she’s still feeling the effects of her ruined credit history. However, she can work to rebuild her credit score and get the financial security she needs.

But Tom Quinn, Credit.com’s credit scoring expert, warns that it may be a slow process. With high unemployment and a lingering recession, “it gets even harder and more frustrating for those people who may have some degree of negative payment history showing on their credit reports and are trying to re-establish their credit history,” Quinn wrote last summer in a story on building credit scores.

[Related Article: Tips to Rebuild Your Credit]

Here, then, are some tips for people who are trying to rebuild their credit scores.

1. Open a bank account. Your checking and savings accounts aren’t typically listed on your credit report, but the information is often requested on credit applications anyway, Quinn says. Also, it may make it easier to get a traditional bank loan, which would give you cash for a purchase and help you build your credit rating. “Many lenders will take existing customer relationship information into consideration when reviewing an application for credit, which could help increase your chances of being approved,” Quinn says.

2. Are you sure Sears won’t have you? Credit cards from department stores and gas stations are historically easier to get than cards from banks “because they make revenue from the purchase of merchandise in addition to revenue associated with the credit issuer,” according to Quinn. Even if you applied a few years ago and were denied, perhaps your score or the retailer’s lending requirements have changed since then. It doesn’t hurt to try again.

3. Apply for a secured credit card. When you open a secured credit card, the amount you deposit becomes your credit limit. Banks usually report payments to such an account to credit bureaus the same way they do with regular credit cards, so this is a way to build your credit score using cash you were already going to spend anyway.

4. Become an authorized user on someone else’s credit card account. When you do this, the card holder’s payment history appears on your credit report. This could be a boon to your credit score, but there’s a chance it could also hurt you, Quinn warns. “If the card holder has stellar credit, it has the potential to help boost the authorized user’s credit score,” says Quinn. “Note, there is risk with this option as any negative performance on the card holder’s credit card will also show on your credit report as well.”

5. Apply for a traditional credit card from a credit union or a smaller bank. “Smaller banks and credit unions may be more flexible and willing to work with you directly to help you establish credit,” Quinn says.

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Image: Steve A Johnson, via Flickr

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  • Nancy

    This story just breaks my heart, and makes me feel quite defeated. My husband and I are trying to recover from the debt incurred during his illness that began suddenly in 2004 and ended in 2009 (he had a stroke at age 40, heart attack at 41 and heart transplant at 42) and we make enough to keep our bills afloat, though American Express refused to work with us, and took me to court on my underpaying. That plus a modification of our mortgage caused my score to go to around 620, and it barely budges, though my husband had returned to work, and we earn around $200K a year. Creditors who once recruited us heavily treat us like dirt, and mostly me, as AMEX really hurt me, vs. my husband. He has immense guilt for this, as his credit is better, but I took on all financial responsibilities during his illness, and now I am paying for it dearly after our family emerged from that little bit of hell. I search your site often for some real advise to make a difference, but usually, like this article, there is little there, other than to tell me I will suffer for an additional 7 years after the 5 I already suffered (and aged, healthwise, myself) during the illness. One thing I know, is there needs to be alternatives for people who do NOTHING to cause their problem. My husband is adopted and his illness was genetically connected, for those that assume he had a bad lifestyle. I will never, ever endorse or do business with AMEX again, and I seize every opportunity to tell my story of how they treated us to others. I do hope the websites that are popping up that give people the heads up about these vultures become the norm, as someone needs to ring the bell on them.

  • Nancy

    By the way, I can’t help but notice that credit.com ignores medical related impacts on peoples finances. Obviously, it scares you folks to the extent that you won’t touch it in any way. Probably because there IS NOT GOOD OUTCOME….right?!

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