It is a common misconception that those who are retired no longer have to worry about their credit scores. While this may have been the case a long time ago, these days’ seniors are retiring with large amounts of debt. As a result, their credit scores can matter well into their retirement days. Debt, however, is only one of many reasons seniors should continue to maintain good credit after they have retired.
- A good credit score helps debt shrink faster
The Federal Reserve Bank of New York reported that debt among Americans ages 50-80 grew 59 percent between 2003 and 2015. Seniors are increasingly retiring with mortgage, auto and even student loan debt. A good credit score, explained Equifax, could help seniors refinance their mortgages for lower interest rates and consolidate their student loans.
When seniors allow their credit scores to decrease, they are seen as greater risks in the eyes of lenders. Thus, it will be more difficult to qualify for loans.
According to U.S. News and World Report, a good credit score can also lower your auto and homeowners insurance premiums. When you repair bad credit or even just maintain a high score, you may become qualified for better premiums each year. As a result, it is good to check on your plans every year and compare them to others available to you to make sure you are getting the best deals.
- A good credit score can be helpful for unplanned expenses
You can’t predict the future, and there may come a time during your retirement when you’ll need to take out an unexpected loan. Equifax explained that bad credit could present a problem should you experience a medical emergency or finally decide to open the small business you have always dreamed of. It’s important to keep yourself in a financially safe position, because you never know what’s around the corner.
- A good credit score will help you have fun
Maintaining a good credit score can help seniors qualify for credit cards with better rewards and interest rates. The best rewards cards will help you earn points toward exciting travel and leisure activities. So maintaining a good credit score can actually help fund some retirement fun. Just make sure you are always paying off your full balance. It’s important not to overspend, as an unpaid credit card can lower your score.
What not to do
When trying to maintain good credit, Money Talks News recommended saying no to cosigning on your grandchildren’s credit cards. You take an incredible risk when you associate your credit with someone who probably has not yet learned financial responsibility. In addition, personal finance expert Liz Weston told the publication that if you are separated from a spouse, it is vital to also split up your accounts. Otherwise, your spouse could be missing payments in your name without you even knowing.
In addition, definitely don’t stop using a credit card altogether. Curtis Arnold, a credit expert at CardRatings.com, told Money Talks News that all seniors should have a credit card even if they think they don’t need one anymore.
“If they stop using credit cold turkey, their credit score is likely to be adversely affected,” he said.
Retirement should be the most fun and stress-free time in your life, and if you just spend a little time focusing on your credit score, it still can be. Retirement is about feeling relaxed, and the more financially protected you feel, the more relaxed you’ll be.