When a borrower passes away, their credit file must be updated promptly and accurately to prevent identity theft, reduce the risk of fraudulent account activity, and ensure the account status is reported correctly for legal and financial purposes. The FCRA and Metro 2® guidelines provide specific requirements for how to handle deceased borrowers.
Why Accurate Deceased Borrower Reporting Matters
Failing to update an account for a deceased borrower can:
- Cause distress to the borrower’s family if collection notices continue
- Lead to fraudulent use of the account by identity thieves
- Result in inaccurate credit reporting that violates the FCRA
Steps for Reporting an Account When the Borrower Is Deceased
1. Update the Consumer Information Indicator
Metro 2® requires the use of:
- Code “XH” — Deceased
This code flags the account as belonging to a deceased individual, ensuring lenders and credit bureaus are aware.
2. Close the Account and Set Balances to Zero (If Applicable)
If the debt has been resolved through insurance, estate settlement, or other means:
- Balance Amount: $0
- Scheduled Monthly Payment Amount: $0
- Account Status: Paid, closed, or settled, as applicable
If the debt remains and will be addressed through the estate, retain the balance until resolution.
3. Preserve Historical Data
Do not delete the account from the credit file. Instead, retain the complete payment history and account details for the standard reporting period, adding the “Deceased” indicator for clarity.
4. Update All Associated Tradelines
If the deceased borrower had joint accounts or co-signers:
- Continue reporting the co-borrower’s tradeline normally
- Remove only the deceased borrower’s name from joint reporting where applicable
FCRA Compliance Requirements
Under the FCRA, furnishers must:
- Ensure information is accurate and not misleading
- Respond to any disputes from the estate or surviving family members
- Promptly update the account once the borrower’s death is verified (usually via a death certificate or Social Security Administration notification)
Impact on the Consumer’s Credit Report
- Stops New Activity — Prevents new charges or credit applications under the deceased’s name.
- Clarifies Legal Responsibility — Shifts financial responsibility to the estate or surviving co-borrowers.
- Preserves Historical Record — Allows accurate future reference for legal and financial matters.
Conclusion
When a borrower dies, the account must be updated with the “Deceased” indicator, closed or resolved as needed, and preserved with its complete history. Accurate reporting not only ensures compliance with the FCRA and Metro 2® standards but also protects against identity theft and provides clarity for lenders, family members, and estate administrators.