Does Foreclosure Affect the Executor's Credit?

Death is part of the human life cycle. Once a person dies, those left behind must not only make funeral arrangements but must wrap up the financial affairs of the decedent. An executor is responsible for overseeing the estate of a person whose has passed away. It's prudent to understand how a foreclosure can affect the credit of the executor.

Considerations

The executor of an estate is responsible for overseeing the estate of a person whose has passed away. The executor can be a relative of the decedent or a non-related individual. The duties of the executor vary according to the size and complexity of the decedent's estate. Among other duties, the executor ensures that the decedent's bills and taxes are paid, determines if the estate must enter probate, distributes property according to the decedent's will or, if no will is available, according to the statutes under state law.

Significance

According to myFICO, a FICO credit score is based upon the items contained within a consumer's credit report. A foreclosure occurs when the lender retakes possession of a property from a borrower, usually due to lack of payment. A mortgage loan and its subsequent foreclosure will appear on a credit report; however, unless the executor is a party to the actual mortgage loan, a foreclosure on the property of the decedent will not affect the credit of the executor since the foreclosure does not appear on the executor's credit report.

Warning

If the executor is a spouse or other individual who also happens to be a party to the mortgage loan and is thus responsible for its payment, then a foreclosure by the lender will appear on the executor's credit report. A foreclosure is a negative item to have on a credit report and it will have an adverse impact on the executor's FICO credit score. According to MSN Money, a foreclosure can drop your FICO credit score anywhere from 85 to 160 points.

Consequences

Under the Fair Credit Reporting Act, negative items, such as a foreclosure, can appear on a credit report for up to seven years from the date of the foreclosure. It will display on the credit report as a public record and is visible to anyone who accesses the credit report. Also, some states allows lenders to sue mortgage owners for the difference between the price the house sold for after foreclosure versus the balance still owed on the loan. If the lender sues and obtains a judgment for this amount, called a deficiency, this judgment will also appear on the executor's credit report.