Do Seniors Still Need to Worry About Their Credit?
You’ve passed some major milestones. Maybe you’ve paid off your mortgage or put your kids through college. So, is it really important to keep monitoring your credit score or to try boosting it from good to excellent? It may be.
Keep in mind that FICO is the most commonly used credit score measurement. Scores range from 300 to 850. A “good” FICO score is in the range of 670 to 739, “very good” is 740 to 799 and “exceptional” is 800 and above.
Here’s why your credit score still matters no matter what age you are.
Why it’s important to have good credit as a senior
They say you’re never too old to try something new. Well, the same applies to your credit. No matter your age, good credit can help you unlock competitive interest rates, pay less for insurance premiums and travel more affordably. Let’s take a closer look.
Good credit may help you jump back in the real estate market
Even if you’ve paid off your mortgage, many seniors eventually decide to downsize to a smaller place, or relinquish the responsibilities of homeownership and become a renter (and enjoy the money brought in by the home sale). But a bad credit score can hurt you when applying for a mortgage or submitting a rental application.
Good credit can help you travel
Is one of your retirement goals to travel more often? Travel rewards credit cards, coupled with responsible credit use, may help you unlock rewards such as free or discounted travel. Generally, you need to have good credit to qualify for cards like these.
Good credit may help you in a job search
Whether you’re still working or looking for a part-time job during your retirement, it’s not unheard of for companies to conduct credit checks on potential employees. They will not check your actual credit score but may ask to see a credit report. (Keep in mind that you will have to give permission before they can access your credit report, and the information included will not be as extensive as it would if a lender pulled it).
Good credit may help lower your insurance premiums
Some insurance companies will consider your credit history when deciding your rates and whether to insure you at all. That can be true for policies ranging from auto insurance to homeowners insurance. For better or worse, insurers see credit history as a form of risk assessment, and may assume that someone with a poor credit history may also make poor decisions in other areas of their lives.
How to build and maintain credit as a senior
The good news: Though it may take time, boosting your credit score can help give you peace of mind. And, among the other benefits, having a good enough score to quality for higher credit limits can help you manage an unexpected emergency situation if you don’t have the cash to cover it right away.
Here are some ways to build and maintain credit, as well as tips to improve your credit score.
Check your credit score
The first step in building credit is knowing where you stand now. That’s why checking your score is so important. You can check your score for free at LendingTree, and it’s also a good idea to check your credit report — which you can do annually for free — to make sure all accounts in your name are accurate and contain no fraudulent accounts or activities. If all checks out, then you can assess the next steps you may take to improve your score.
Pay bills on time and consider autopay
Multiple bills and due dates can be confusing. If you feel your credit score may have dipped due to overlooked credit card bills or other bills, consider moving from paper bills to autopay. When you enroll in autopay, either the minimum, the balance or an amount you designate is paid to the lender at the same time each month. You can always pay more, but by enrolling in autopay, you won’t miss a payment.
Pay attention to your credit utilization ratio
Even if you pay bills on time, your credit may suffer if you carry a balance that’s close to your limit. When your credit is nearly maxed out, it’s called having a high credit utilization ratio, and it can have a significant negative impact on your score. If you can’t pay off a balance, consider transferring the balance to a card with a higher credit limit and making a plan to pay off the debt so your credit utilization rate is lower.
Don’t close credit cards
If you’re not using certain credit cards, you might be considering closing them. But that can negatively impact your score. Part of your credit score hinges on the length of your credit history (and eventually, those closed accounts will come off your report). If you must close cards, consider keeping the one you’ve had open the longest. Closing cards can also increase your credit utilization ratio, lowering your credit score.
Come up with a plan for unpaid bills
Life happens, and a large medical bill here or other unpaid bill there can damage your credit score. Instead of ignoring a bill, come up with a plan to deal with it. It may be possible to negotiate a lower amount with the lender. It may make sense to consider a reverse mortgage to help you pay off debts. Seeking free or low-cost financial advice from a professional can also help you come up with plans for next steps. You might consider speaking with a credit counselor or looking at debt relief options for seniors.
Paying attention to your credit score can give you peace of mind
Having good credit means there is one less thing to worry about when it comes to your finances. It’s never too late to boost your score, and the gains you make can positively affect your financial future. Remember, age may be just a number, but your credit score has real-world implications, so it’s important to keep an eye on it.