Borrowers face plenty of reasons for rejection when they apply for credit, but perhaps the most distressing is being told that a creditor or credit bureau believes you're dead.
That might seem incredible, but it's a mistake that does occur.
Typically, this error happens because the borrower shared a joint account with a person who died and a creditor incorrectly notified the credit bureau, which then flagged the wrong person's account or file with a so-called death indicator, according to David Blumberg, a spokesman for TransUnion, a Chicago-based credit bureau.
"In the majority of cases, it concerns joint accounts such as a husband's and wife's where a spouse dies, or someone is associated with an authorized user account and someone on the account passes away," Blumberg says.
The error also might arise within the credit bureau itself, again for the same reason.
A death indicator is a necessary and appropriate way to protect a deceased individual's credit information from misuse such as fraud or identity theft, says Rod Griffin, director of public education for Experian, a credit bureau in Dallas. The indicator is problematic only when it flags the wrong account or file.
"If you applied for credit, the lender would request a copy of the credit report and we would send a notice saying this credit history is reported as belonging to a deceased individual, which would tell the lender, 'something is odd here, and we probably should do some more research before we put this through.' That would stop the process," Griffin says.
This scenario could prove distressing to the joint account holder who's alive. Yet a consumer who encounters this sort of mix-up should try to remember that this is a technicality that can be corrected, not a bad omen.
"The deceased indicator isn't saying you're dead," Griffin explains. "It's saying this account has been reported by a creditor as being associated with a deceased individual."
A fine point, though one that is a small comfort for a consumer with such a major error on their credit report.
Notify the Credit Bureaus
Correcting the error involves research and paperwork.
The first step is to obtain a credit report from each of the three major credit bureaus -- TransUnion, Experian and Equifax. Review the reports and try to determine whether the deceased indicator has been applied to a specific account -- a mortgage, auto loan or credit card -- or to the entire credit file.
If individual accounts have been flagged, the creditors and credit bureaus should be notified and asked to correct the errors. Each bureau has its own procedure for this notification, but typically, the process will involve a telephone call or letter, possibly notarized, plus documentation such as a driver's license, state or military identification card, or bank statement. Don't send original documents; copies will do.
If the entire credit file has been flagged, the error might have originated with the executor, administrator or representative of the deceased's estate, or with the Social Security Administration, which circulates a list of Social Security numbers associated with deceased persons.
"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.
If the mistake originated at the Social Security Administration, the credit bureau might require a letter from that agency to remove the indicator.
The bottom line is that an erroneous death indicator can be a major headache, yet it's an important matter that can be remedied.
"It's understandably distressing, but we can get it cleared up very quickly." Griffin says.