Smart consumers know the value of good credit. But what happens to that credit record and score when someone dies?
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Answer: The individual's credit accounts and files should be flagged with a so-called death indicator to protect against misuse of the information, including fraud and identity theft.
That flagging can occur in several ways, says Anthony Sprauve, a spokesman for FICO.com, a consumer information website operated by FICO, which invented the FICO credit score.
The most direct way is for the executor of the deceased's estate to notify the three credit bureaus -- Experian, TransUnion and Equifax -- of the person's death.
"That essentially prevents a FICO score from being created or a credit report from being pulled for that person," Sprauve says. "It shuts the process down."
Another avenue is that creditors also update their own files based on information they obtain from newspaper notices, public records and court documents. Once a creditor flags an account, a death indicator will follow the next time the creditor updates the credit bureau, Sprauve says.
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The most likely way, given the confusion that surrounds most families at such a time, is via the Social Security Administration. The federal agency maintains a so-called death list that tracks the Social Security numbers of people whose deaths have been reported. Once an individual's number pops up on that list, a death indicator will be triggered on the credit file, says Rod Griffin, director of public education for the Experian credit bureau.
Change account or file
It's important to understand that a death indicator can be applied to an account, such as a credit card or home loan, or a file, which is a collection of accounts. Typically, a notification by a creditor would apply only to an account, and a notification by an executor or via the Social Security Administration list would attach to the file.
"The entire file having a deceased indicator applied is predicated on either the Social Security Administration or the executor of the estate notifying us," Griffin says.
Once a death indicator is attached to a file, any creditor who attempts to open a new account in that person's name will be informed that the individual has been reported as deceased.
An executor, also called an administrator or personal representative, can obtain a copy of a deceased person's credit report by writing a letter to the credit bureau and enclosing a copy of the death certificate. And that can be done even after the file has been flagged with a death indicator, Griffin says. The executor can then use the credit report as a record-keeping tool in managing the estate's finances.
Griffin says it's not necessary, but still a good idea for an executor to notify the credit bureaus of a death because creditors or the Social Security Administration might take several weeks to put that information through the system.
Identity fraud risk?
In the meantime, there is a greater risk of identity theft, according to Nikki Junker, social media coordinator and victim adviser for the Identity Theft Resource Center in San Diego.
Junker says the Social Security death list, in particular, can create a risk since it discloses the deceased individual's Social Security number and the fact that the person has died. For that reason, the center advises executors to make the effort to notify the credit bureaus directly.
"We recommend that you go ahead and take these steps just to make sure (identity theft) doesn't happen because it's really, really distressful," Junker says. "Someone has passed away, and all of a sudden, you're getting bills in their name, and you're getting collections calls, and there is no way that they have that credit card."
Additional notifications mean extra paperwork and more fees to get copies of the death certificate. But Junker says the effort and cost is worthwhile, even at such a stressful time. The cost for 20 copies might range from less than $100 to more than $300, depending on the state. Some states offer a discount for multiple copies ordered at the same time.
"It's a lot easier to do it when you're dealing with all the other paperwork than it is to wait and have to fix all the problems (if fraud occurs)," she says. "It's definitely worth it."
Fees for obtaining copies of death certificates
Texas: $20 for the first copy, $3 each additional copy, ordered at the same time, up to $17.50 for express mail delivery. For 20 copies, it costs $77.
Wisconsin: $20 for search, $3 each additional copy, ordered at the same time, $20 expedited service. For 20 copies, it costs $77.
Florida: $5 first certified copy, $4 each additional copy, $10 rush delivery. For 20 copies, it costs $81.
Rhode Island: $20 first copy, $15 each additional copy, $7 expedited service. For 20 copies, it costs $305.
California: $14 per copy, can take up to four weeks to process, check or money order only. For 20 copies, it costs $280.
Colorado: $20 first copy, $13 each additional copy. For 20 copies, it costs $267.
Pennsylvania: $9 per copy. For 20 copies, it costs $180.
Source: State offices of vital statistics.
Note: Although it's not a comprehensive study, Bankrate checked several states from different parts of the country to give readers a sense of how much these documents can cost.