Rejected for a loan because your credit history was shut down? It might be because the credit bureaus think you're dead.
About 1,000 people per month get mistakenly declared dead by the Social Security Administration, according to government estimates. Many more get falsely reported as deceased by their bank or credit card issuer, or by one of the big three credit bureaus -- Experian, Equifax and TransUnion.
Often, when victims find out that they have been mistakenly declared dead, they assume that proving they're alive and well will be easy. Instead, they find they will have to wait a month or more before lenders will acknowledge their living, breathing, bill-paying status.
Or, in more extreme cases, they're told that they must be mistaken. They can't possibly be alive right now because investigators have looked into their case -- and records show they've passed away.
"There's a sense of powerlessness, a sense that you are disenfranchised," says James Willis, a California journalist and professor who was mistakenly declared dead by Capital One two years ago. Willis had started a new job and was getting ready to buy a house when he learned that, according to credit-reporting agency Experian, he had recently died.
"The news of my demise came in the form of a credit alert from Experian," Willis recalls. "It said a potentially negative item had just been posted to my credit report."
When Willis followed up, he learned that one of his lenders, Capital One, had written off his charges as uncollectible because they believed that he was dead. Experian then froze his report, shutting out the mortgage company that Willis had enlisted to help him buy his house.
"When a credit card company declares you dead, then they send that notice on to the credit-reporting agencies, and then your credit history gets locked down," explains Willis. "You cannot access it. Nobody can access it, because of the fact they assume you're dead."
At that point, being mistakenly declared dead shifts from minor annoyance to potential big, costly problem, says Jim Francis, a consumer lawyer in Philadelphia who has represented clients who have been declared dead on paper.
"The real problem with being marked as deceased on a credit account is you can't get a credit score," says Francis. "It's impossible to get credit to the extent that most banks, mortgages (and) car dealerships require a credit score to assess risk. They have no possibility of getting that, and so there's no way of getting credit.
"That's the real problem and the real harm," he adds.
Getting resurrected takes time
The amount of time it takes for "dead" consumers to be brought back to life can also hurt, say consumer advocates. Credit bureaus have 30 days under the Fair Credit Reporting Act to investigate a credit dispute and check on whether the information they have on file is correct.
However, that's a long time to wait if a consumer is in the midst of applying for a time-sensitive loan, such as a mortgage, or is applying for a job and needs an immediate credit check, says Todd Mark, vice president for education at the Consumer Credit Counseling Service of Greater Dallas. "Those are situations where you don't want to have to wait 30 days or longer for a dispute to be initiated," says Mark.
In the meantime, customer-service representatives are rarely able to help speed up the process, which can be frustrating for a consumer who's on a tight deadline, says Willis, the customer mistakenly declared dead by Capital One.
Short on time and anxious to erase Capital One's mistake, Willis says he spent several hours on the phone, trying to get someone to help him in time to close on his home loan.
However, the workers at Capital One told him there was nothing they could do. Instead, Willis had to wait for the bank's computers to process an investigation into the mistake and report back to the credit bureaus, he says.
"I don't think you're dead," Willis says one customer-service representative told him over the phone. "I know you're alive, but our computer is in control and our computer has 30 days to rectify the situation."
"That's when it took kind of a leap into the twilight zone for me," says Willis. "Even though the individuals at Capital One believed I was alive, no one seemed to be able to do anything about the computer."
Eventually, Capital One figured out that it had mixed up Willis with his deceased father, James Willis Sr., and restored his account. However, by that time, Willis had already spent countless hours trying to resurrect his credit.
"That's what started weighing on me," says Willis of the time spent trying to get the mistake corrected. "I was starting a new job at the time, and it was just a lot of time devoted to it -- a lot of distraction that was caused by this.
"One of the frustrating things is to try to get them to understand that your time is valuable," he adds.
- Calculator: Find a better credit card
It may take months -- or years -- to resolve
Willis was lucky. He was able to get his dispute resolved in less than a month and closed on his house just in time. However, other consumers have had to wait much longer to get their financial lives back on track.
Francis, the consumer lawyer in Philadelphia, says that many of his clients came to him in desperation after submitting their disputes through the credit-reporting agencies' automated dispute process and getting nowhere.
"They tried sending detailed disputes, documentation (saying), 'Here I am. This is my Social Security number. This is obviously not me.' And surprisingly, in a bizarre fashion, the credit-reporting agency verified them as being deceased," he says.
That's when their lives turned upside down. Not only could they not get credit, but they had no idea how long it would take the credit bureaus to figure out the mistake.
- More from CreditCards.com:
- How to talk yourself out of going into debt
- Avoid credit card debt through personal fundraising
- Prepaid card debuts for recovering addicts
If you, too, find that you are having trouble proving to lenders that you're alive, don't panic.
Prepare a detailed, notarized dispute for the credit-reporting agencies that includes documentation proving you're alive, and send it by certified mail, say experts.
Also send a notarized copy of your dispute and copies of supporting evidence to any furnisher or creditor that you believe may be responsible for the mistake. If you believe the Social Security Administration is responsible for the mistake, contact your local Social Security office.
In addition, write down the name and number of every person you talk to over the phone, including what the person promised he would do for you, says Mark. "Create your own paper trail at home, and don't be afraid to step up who you talk to," he says.
If nothing works and your credit information is still shut down, seek legal help. Under the Fair Credit Reporting Act, you are entitled to seek legal action when legitimate errors -- such as being mistakenly declared dead -- aren't corrected in a reasonable period of time.
Finally, remain calm, says Willis. If you believe you've located the source of the error, try calling repeatedly until you get a sympathetic voice on the line, he says. "I found one of those individuals with Capital One, and I found one with Equifax," says Willis.
Explain your situation and understand that the person is at the low end of the totem pole and may not be able to do much to help you, he adds. "The natural tendency is just to boil up, but it doesn't help anyone to do that. You just have to try to reason with them. Try to remain calm and reasoned, and try not to appear like a nut."
- Calculator: Find a better credit card
Credit-reporting agencies are required by the Fair Credit Reporting Act to thoroughly investigate any item on a credit report that a consumer says is wrong. However, in many cases, Francis says, the original furnisher of the information got the record wrong, not the credit bureau, and the credit-reporting agencies don't follow up.
"The credit-reporting agencies don't conduct any type of independent investigation," says Francis. Instead, they send a consumer's dispute to the organization that supplied the information and rely on it to look into whether a consumer is really dead. "That's how things are getting verified," he says.
If a creditor looks at its records and sees that the consumer is listed in its files as deceased, it might not dig further, says Francis. "They're not really that interested in conducting investigations," he says. "It's not really a profit center for them, so they are doing the bare minimum." As a result, the creditor sometimes ends up repeating the same inaccurate information to the credit bureaus.
At that point, consumers have few options but to wait and try again.
Banks and other creditors are required by law to thoroughly investigate whether the information they have on file is correct, says Francis. "They have the same duty that the credit-reporting agency has," he says. "Both the credit-reporting agency and the furnisher must conduct a reasonable investigation." So consumers have the legal ammunition to fight back against credit-reporting agencies' and furnishers' claims that they are dead.
However, they have little power to speed up the process and get their credit reports unlocked when they need them.
"It takes a really persistent effort" to get a dispute resolved, says Nina Heck, the director of the Consumer Credit Counseling Service of Maryland and Delaware. "Sometimes (a dispute) has to be resubmitted and resubmitted."
Heck has worked with multiple clients who have been mistakenly declared dead, and she says it often occurs because a client's name was mixed up with someone else's.
When that happens, proving you are who you say you are can be a challenge, she says. "First, you have to prove that you are you, and then you have to be able to validate that this (other) person is deceased," says Heck.
Beware of the Death Master File
Consumers who have been accidentally declared dead by the Social Security Administration, rather than a creditor, have it even worse. The Social Security Administration keeps a master list called the Death Master File that lists everyone in the United States who has died. Sometimes, a person will get mixed up with someone else, or a typographical error will cause that person to be listed as deceased.
Once a consumer is listed as dead in the Death Master File, numerous stakeholders are notified, including the credit bureaus and other government agencies. Soon after, that individual's credit reports are shut down, his or her benefits are cut off, and the person can't get a new job (that requires a valid Social Security number for a living person).
Getting taken off the Death Master File, meanwhile, can sometimes take years, financially devastating those involved.
"As many news reports have accounted, incorrect death reports have created severe personal and financial hardship for those who are erroneously listed as deceased," said U.S. Rep. Sam Johnson of Texas in February, announcing a congressional hearing on the Death Master File's accuracy. "Those affected have experienced termination of benefits, rejected credit, declined mortgages and other devastating consequences, while their personal and private information is publicly exposed."
