You might think once you’re retired, your credit score doesn’t matter, but it does. Life is unpredictable and you never know what might happen and when your credit score might be an issue. It’s always best to watch your outstanding debt and take care of your score.
Here are the top reasons you should care about your credit score in retirement.
You May Need a Mortgage
Right now you might think you’re happy where you are, but that could change. Whether your health changes, your lifestyle changes, or you decide you want to live in a different climate or closer to family, you might need to buy another home or downsize, from a home to a condo.
Since housing costs are different everywhere, you might not have enough money in your current home to buy a home somewhere else in cash. This means you might need a mortgage and to get a mortgage, you need good credit, even if you have a large amount of down payment.
Neglecting your credit during retirement could leave you with fewer options to relocate, leaving you with potential problems.
You May Want to Apply for Reward Credit Cards
Credit cards aren’t always bad if you use them right. In retirement, you might want to take advantage of the protection they offer or enjoy rewards just for charging things you normally pay for, like groceries and gas.
If you know how to use credit cards responsibly and will pay the balance off in full each month, you’ll want a high credit score so you have access to the best credit cards available.
You May Get Higher Insurance Premiums
You need insurance throughout your life, no matter if you’re working or not. Car insurance and homeowner’s insurance are just a couple of examples. If you plan to apply for new insurance to get your rates down, you may need good credit.
Some insurance companies check credit and base your premiums on it. If you have a low credit score, that means you will pay more for insurance. They do this because your credit score signifies your risk level. The lower your credit score is, the higher risk you are at in most areas of your life.
You May Need to Put Down a Security Deposit in a Retirement Home
If you move into a retirement home or any other sort of ‘group living,’ you may need to put down a security deposit. Building owners usually determine the required amount of the deposit based on your credit score.
Again, the lower your credit score is, the higher the risk you are so they will require a larger security deposit.
You May Need a HELOC or Personal Loan
Life happens before we know it and sometimes we need money we don’t have. If you need to tap into your home’s equity or take out a personal loan quickly, you’ll need good credit. The higher your credit score is, the higher your chances of securing the funds you need become.
A good credit score not only ensures that you get approved, but that you get the best rates and terms too.
How to Fix Bad Credit in Retirement
Keeping your credit score up during retirement takes a little work. If your credit score falls, it’s important to know how to fix bad credit in retirement. With these steps, you can ensure you have the score you need.
Pay your Bills on Time
Any remaining bills you have, pay them on time. This includes any loan payments or credit card payments. Don’t let anything get past the due date. Your payment history is the largest part of your credit history.
If you take out new loans, make sure you can comfortably afford them, especially if you’re on a fixed income.
Don’t Overextend your Credit Lines
Your credit lines aren’t meant to be maxed out. Instead, you shouldn’t charge more than 30% of your total credit line. This means that, do not have a balance of over $300 for every $1,000 in your credit line.
This doesn’t mean you can’t use your credit cards, but you should use them wisely. Watch your outstanding debt and don’t get yourself into a situation where you charge something that you can’t afford to pay off.
Your credit cards aren’t an extension of your income, but instead a tool to use to help your personal finances.
Have a Good Mix of Credit
Keeping a good mix of credit shows lenders you can handle most types of debts. If you have all revolving debt (credit cards), you pose a high risk because you don’t show that you can handle fixed payment loans, such as a car loan or mortgage.
If you don’t have any revolving debt, though, you don’t show that you can roll with the times and keep up with your debts. Having a decent balance of both types of credit can help your credit score.
Don’t Close Old Accounts
Your credit length is important too. The longer your credit history is, the better it is for your credit score. Even if you have old credit cards you won’t use, keep them open. If you don’t trust yourself with them, lock them up in a safe or give them to a trusted relative.
If you must close any old accounts, close newer ones first. You need the older credit history to help your credit length to support your credit score.
If you need help improving your credit score during retirement, contact our debt experts today. We can help you figure out what’s hurting your credit score and how to fix it.
If you have too much debt, we can help you with a debt reduction plan so that you get the financial freedom that you deserve. Becoming debt free going into retirement gives you the freedom to experience a stress-free life. It’s never too late to try to figure out a way to improve your credit, even in retirement.
You need a good credit score for many reasons, so don’t give up in retirement. If you need help, contact our debt experts today. We’re here to help!