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.

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What Does High Risk Fraud Alert on a Credit Report Mean?

High risk fraud alerts are one of the cheapest ways to stop an identity thief from stealing under your name. Creditors, however, can render this fraud prevention ineffective if they choose to ignore the proper protocol when consumers have an alert on their profile. If you want better protection than a fraud alert, you should look into a credit freeze.

Identification

When consumers have a high risk fraud alert on their credit report, the lender is supposed to ask them to furnish appropriate identification, such as a drivers license. The alert is a note included in the credit report that tells the lender that somebody might be trying to take out a loan in your name. Anybody can request an initial alert by contacting one of the three major credit bureaus, who will then notify the other agencies once they approve your request. The initial alert lasts for 90 days.

Extended Fraud Alert

An extended fraud alert stays on your credit report for seven years, but to get one requires more than just a phone call. You must be a victim of identity theft and provide proof, such as a police report. Alternatively, you can request an initial fraud alert every 90 days as many times as you want. Initial alerts, however, are less secure because you could forget about it or it might prove too inconvenient. The thief might not even use your stolen information within 90 days.

Downside of Fraud Alert

The law on taking proper measures to verify identity when a lender sees a fraud alert is extremely vague. More often than not, lenders simply ignore fraud alerts, according to MSN MoneyCentral. Also, fraud alerts are useless for protecting existing accounts, because lenders have already approved the account. The verification process for a fraud alert can delay an application for credit, especially time-sensitive special offers.

Removing Fraud Alert

The major credit rating bureaus have printable, online forms so customers can request the removal an alert. You will have to fill this out and send it via snail mail and include verification of your identity before the agency agrees to remove a fraud alert.

Alternative to Fraud Alert

The three major credit bureaus are required to give one free credit report--which does not include a score--each year. You cold request one every four months and monitor your own credit. You could do a credit freeze. A credit freeze stops anyone from looking at your report. The downside to this is the hassle. You will have to approve each lender before he can look at your credit report. The benefit is that a would-be thief cannot take out a loan in your name unless he finds out your special PIN or password. Also, you will have to pay about $10 for a credit freeze with each bureau as of 2010.

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How Can I Get My Credit Scores Without the Credit Monitoring?

Getting access your credit score can give you an idea of where you stand with borrowers and how much you need to improve before applying for a loan. When you get online and start to try to get your credit score, you may find many offers that include your credit score with a credit monitoring service. If you do not want the credit monitoring service, you can still get your score.

Free Credit Reports

According to federal laws, you are eligible to receive a copy of your credit report from each of the three major credit bureaus every year for free. You can get a copy of your credit report without paying for credit monitoring or anything else. The problem with this free credit report is that you cannot see your credit score. The credit score is calculated off of the information in your credit report, so you will have an idea of whether it is good or bad, but you will not know the exact score.

Credit Monitoring Offers

On many of the websites that offer access to your credit score, you also have to sign up for a credit monitoring service. For example, you might get access to your credit score but you have to enroll in a credit monitoring service that charges you $20 per month. You might get a free trial period in the credit monitoring service and you can cancel at anytime. While this will give you access to your credit score, you have to go through the trouble of canceling the credit monitoring service.

Buy Credit Score

Although you cannot get your credit score with a copy of your free credit report, you can buy a copy of your report with your score attached. You can buy the score directly from the credit bureaus or you can go to the Fair Isaac website. For example, you can buy a copy of one of your credit reports from FICO that includes your credit score for a one-time fee. When you do this, you do not have to worry about being signed up for credit monitoring.

Considerations

Although a credit monitoring service may not seem like something you want to get involved with, it can sometimes be cheaper to go that route. When reviewing the terms of the offer, check out the price and exactly what you get. In some cases, you may be able to gain access to all three of your credit reports and scores for a cheaper price than what you can pay for a one-time look at your credit reports. Then you could cancel the monitoring service.

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If I Pay Off My Credit Cards in Good Standing Will That Increase My FICO Score?

Paying off credit cards in a timely manner sounds like a positive action, but its effects on a consumer's credit score is mixed, according to the FICO score compiling firm. Certain aspects of a payoff are positive, but others are neutral or even potentially harmful when weighed against other factors.

Definition

The Consumer Federation of America explains that a FICO credit score is a three-digit number ranging from 300 to 850 that gives a fast indicator of a person's likely creditworthiness. Lenders are more likely to give credit to consumers with scores above 700, while they avoid people with scores below 600, or charge inflated interest rates to offset the risk.

Factors

FICO credit scores are compiled based on a variety of financial factors, including credit card payments and balances. FICO explains that it also looks at how many accounts a consumer has, balances, credit lines, how long accounts have been open and the number and length of any delinquencies. It gets this information from credit reports, so the score can change regularly as lenders and banks report new information, including account payoffs.

Benefits

A FICO score is always helped by keeping a credit card in good standing with on-time payments. Of the total score, 35 percent comes from a consumer's payment histories on credit cards and other accounts. Paying off a card completely lowers a person's total outstanding debt. This may raise the FICO score if the original debt load was high.

Drawbacks

A credit card with a zero balance gives the person more available credit. Too many inflated limits can hurt the credit score, FICO warns. Paying off all credit cards eventually lowers a credit score if the consumer stops using them completely. FICO looks at a consumer's mix of accounts, and no active credit can be harmful. The paid-off accounts usually drop off credit reports in seven years, after which they no longer count toward the credit score. It will go down if there is more recent negative activity.

Considerations

Consumer advocate Clark Howard recommends periodically using paid-off credit cards and paying the bills immediately to create recent positive activity on credit reports. The cards can be used every few months for modest transactions. Paying the statement in full as soon as it is received prevents any interest charges. The prompt payoffs help increase the FICO score when they show up regularly on credit reports and get figured into the score.

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Define Credit Bureau

Credit plays a large role in American society. Consumers use credit when making purchases and obtaining loans. There are three major credit bureaus: Experian, Equifax and TransUnion. Each maintains its own unique database of consumer information.

History

In 1899, the first major credit reporting agency, Retail Credit Co., came into existence. The company sold its consumer reports to employers and insurers, and expanded by buying up small credit reporting agencies.

Significance

Credit bureaus house both personal information and credit information on consumers. According to TransUnion, its database alone contains credit files on 500 million consumers around the globe.

Function

Lenders report consumer data to credit bureaus, although they are not required to. Credit bureaus then make this data available to lenders and other credit providers in the form of a report. Bureaus assemble one report for each consumer.

Features

Credit reports contain personal information, such as name, Social Security number, address, positive and negative account data and inquiries from lenders. It also contains public records and collection accounts.

Misconceptions

Under the Fair Credit Reporting Act (FCRA), consumers have the right to dispute incorrect data on a credit report. The bureau then has 30 days to investigate and make corrections. Bureaus are not, however, required to remove accurate, negative information from a credit report.

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Will Cancelling Credit Cards With High Available Credit Hurt My Credit Score?

Your balances owed account for thirty percent of your credit score, according to the Fair Isaac Corporation. Part of this category includes the ratio between you debt and your available credit.

Debt to Available Credit Ratio

You calculate your debt to available credit ratio by dividing your outstanding balances on your credit cards by your total credit limit. For example, if you have four credit cards with a total credit limit of $15,000 and $4,500 in credit card debt, you would be using 30 percent of your available credit. MSN Money recommends keeping the ratio below 30 percent.

Effects

Canceling credit cards with high credit limits can drastically increase your debt to available credit ratio, which will lower your credit score. Continuing the example, if you closed one of the four credit cards that had a credit limit of $6,000, your available credit would drop from $15,000 to $9,000 and your debt to available credit limit would rise to 50 percent ($4,500 out of $9,000).

Considerations

When you close a credit card, you stop generating credit history from that account. If you always pay the card on time, even if you don't have to make a payment because you have no balance, you will continue to improve your payment history, which accounts for 35 percent of your credit score.

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Credit Reporting Bureaus

Credit reporting bureaus gather information about consumers' financial information to determine how creditworthy they are. They then sell this information to lenders.There are three national credit bureaus and a number of smaller credit bureaus throughout the country. Most of the smaller ones are affiliated with one of the three larger bureaus.

National Bureaus

There are three national credit bureaus: TransUnion, Equifax and Experian. Equifax is the oldest and was founded in 1899. TransUnion was founded in 1968, and Experian in 1980.

Information Sources

The bureaus get their information from banks, credit card companies, utilities companies and collections agencies. Each time your payment is due, the creditor reports whether you paid it and other basic information about the account. Credit bureaus also have access to public records, so they report items such as judgments, bankruptcies and collections.

Credit Scores

Credit bureaus compile consumer financial information and use it to calculate a credit score that represents how creditworthy you are. Credit scores use payment history, amounts owed, length of credit, applications for new credit and the different types of credit to determine a consumer's credit risk. The three national credit bureaus use the same factors but slightly different formulas, so your score may differ between credit bureaus.

Services

Credit bureaus must provide a free credit report to each consumer once per year upon request. Credit scores cost extra, but consumers or lenders can purchase a credit score report. Credit bureaus also provide services to help prevent fraud, to verify checks and collections, and to help businesses manage risk.

Errors

Credit bureaus make mistakes. Once alerted to an error on a credit report, they must investigate it within a month.

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