An impact on credit scores during old age can cause severe financial consequences, such as a rise in EMIs and a drop in borrowing capacity. Most people know that usually the credit score is impacted negatively due to financial indiscipline. The question is, can the death of one of the spouses hurt the credit score of the surviving one? In some cases, the death of the spouse could lead to a negative impact on the credit score of the other partner. Here are some of the scenarios under which a spouse can witness stress on their credit score.
Can Your Credit Score Be Affected By The Death Of Your Spouse?
After living many years together, in old age, when the spouse departs to a heavenly abode, the surviving partner is left alone with the responsibility of managing the leftover assets and liabilities. With most of the financial obligations shared between spouses, does the death of any of the spouses affect the credit score of the surviving one?
Repayment Of The Remaining Loan That Was Co-Borrowed
A personal loan or any other unsecured loan that was co-borrowed by both husband and wife and later one of the spouses died, then the outstanding loan amount has to be paid by the surviving borrower. In such cases, the EMI repayment obligation of the surviving spouse increases, thus it may impact their credit score to some extent. Especially, if the EMIs are not paid on time, it can cause a negative impact on the credit score.
Repayment Of Emis On Loaned Assets That Are Inherited After The Death Of The Spouse
After the death of one of the spouses, if the loaned asset is inherited by the surviving spouse, it becomes the responsibility of that spouse to repay the remaining loan amount. The loaned asset impacts the credit score of the spouse in a similar way to any other loan taken by an individual.
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Finally
Usually, retired people plan loan repayment by using their accumulated retirement corpus. After the death of one of the spouses, the surviving spouse can use the allocated corpus to repay the outstanding loan amount to avoid an impact on their credit score. One can also use the claim amount received against the life insurance of the spouse to repay the outstanding loan obligations. Spouses must consider situations arising due to the untimely death of one of the partners, such as the loan repayment plan and the impact on the financial well-being of the surviving spouse and make a plan for repayment of the loan in such circumstances so that the other spouse doesn’t have to suffer because of it.
(The author is an independent financial journalist. Views expressed are personal and do not reflect the official position or policy of Outlook Media Group and/or its employees. The article is for information purpose only; please consult your financial planner/s before investing.)
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