Unless you’ve co-signed, you generally can’t be held liable for a loved ones’ outstanding balance when they pass away. But can you inherit a good line of credit? One Credit.com blog commenter recently wrote to us, asking if a sibling can take over their deceased father’s credit card:
“My father passed some months ago with zero debt on a card, but he had a high amount of available credit. Can the executor of his estate, my sibling, ask the issuer to take over his card?”
The Perks of a High Credit Limit
It makes sense that the sibling would want this credit card with a high limit: It could improve her score. Credit scoring models consider your credit utilization rate — that is, how much debt you owe versus credit at your disposal — when calculating your score. Generally, you want to keep this rate below 30% (and ideally less than 10%) — and a card with no balance and a high limit can help you do that.
Unfortunately, banks and credit card issuers aren’t in the habit of transferring accounts to heirs. “Credit card accounts are non-transferable,” Nessa Feddis, senior vice president at the American Bankers Association, says. “People have to qualify for a credit card.”
The one in question was issued based on the father’s ability to repay his debt, so unless the sibling initially co-signed the contract (which it doesn’t appear she did), an account transfer would be a no-go.
The siblings could contact the issuer — as they should since executors must provide notice of a borrower’s death to creditors. But in order to open a similar account, the potential borrower would need to demonstrate her own creditworthiness. In order words, she’d need to apply for her own account and get approval, with terms and conditions being contingent upon her income and credit score. The father’s account would likely be closed, so no one should use the card in the meantime. Executors “have the obligation to pay any outstanding balance from the estate,” Feddis adds. “They must discontinue using the card.”
Building Your Credit
Not all credit cards are created equal, and spending habits generally dictate which card is best. It’s always a good idea to do some research before applying for one, whatever your motivation. Also be sure to check your credit so you have a better idea of whether you’ll be approved. (Most credit card applications generate a hard inquiry on your credit report, which can ding your score. You can pull your free annual credit reports at AnnualCreditReport.com and see your credit scores for free each month on Credit.com without hurting your scores.)
If you or a family member wants to improve your credit utilization rate, you could work to pay down some balances. Or just ask for a higher limit on a card that’s already in your wallet (though this may require a credit pull as well).
More on Credit Reports & Credit Scores:
- The Credit.com Credit Reports Learning Center
- How to Get Your Free Annual Credit Report
- How Do I Dispute an Error on My Credit Report?
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