If you’re retired, your income and wealth are probably at comfortable levels and credit may be in the back of your mind. However, credit is still important for you — it determines what you pay for insurance, if you can lease easily, or turn on utilities without substantial down payments and whether credit card issuers will keep credit limits at current levels.
Here are five things you can do to help maintain your credit health.
- Ask for a Bigger Credit Limit, But Don’t Use It
Your credit utilization — the percentage of available credit that you’re using — makes up 30% of your credit scores. Experts recommend keeping your utilization rate at 30%, ideally 10%. Increasing your credit limit will lower your credit utilization rate, as long as you don’t start charging more on your card and use up the new increase in your credit line.
- Don’t Close Your Credit Card Accounts
Many people in retirement want to simplify their lives by getting rid of excess possessions and may want to take the same approach to their credit cards. However, this may not be the best thing to do. Closing an account can lower your credit score. It does so in two ways: it can lower the average age of your accounts and increases your credit utilization by decreasing your credit limits.
Closed accounts can stay on your credit report for up to 10 years, according to Equifax, but once an account is removed from your report, it removes the history of the account from your credit report. If history was positive, this could negatively affect your score.
- Don’t Co-Sign for Grandkids or Your Children
It’s a tougher credit world out there for millennials. Oftentimes, they may not be able to qualify on their own for homes, apartment leases, cars or credit cards and may come to you to be a co-signer. Your older children could have fallen victim to the recession, and maybe their credit rating has suffered, forcing them to rely on a co-signer for their credit needs.
While you may want to help relatives, it’s best to think twice about putting your John Hancock on those loan papers. If something should happen and your family member isn’t able to pay, your credit will take a significant hit, as the credit bureaus reflect the loan payment history on your credit report. If you co-sign for a credit card and your kids or grandkids run up the balance, you could see an unfavorable credit utilization rate that could damage your credit score.
- Use Your Credit Cards Occasionally
If your home and car are paid off and you are in the position to pay cash for everything, your credit cards could be collecting dust. In such a case, you could find yourself without credit scores: if you don’t use your credit for six months or more, you become unscoreable. Having no credit score is looked just as unfavorably as someone with bad credit. Dust off one of your cards and use it to buy gas or groceries and you will find yourself in the land of credit scores again.
- Look Out For Identity Theft
Your golden credit rating can be highly attractive to identity thieves who could use it to open credit accounts in your name without your knowledge. You can use your credit reports to watch out for signs of identity theft. (By law, you are allowed one free report from each of the credit bureaus on an annual basis, which you can get by visiting AnnualCreditReport.com.) Examine your report carefully for accounts you don’t recognize, as this is a sign that your identity has been compromised. If you do find mysterious accounts on your credit reports, call the creditor immediately and report the account. You should also file a police report and notify the FTC.