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Why Your Credit Score Matters Even in Retirement

Why Your Credit Score Matters Even in Retirement

In retirement, there are a lot of things you can say goodbye to – a commute, a pain in the neck boss, that 9-5 wardrobe, but some things still matter, your credit score is one of them.

You might be thinking how does the number have anything to do with my golden years? Know that till death do you part, credit scores count. “Your credit history is a reflection of you. It shows if you're responsible or not. Just like as you age you don't want to let your body run down because you want to look good, as you age, you should want to be in great shape financially too,” says Jeff Golding, CEO of WilliamPaid.com, where renters can pay their rent with a credit card.

Here's why you should still work to keep it well above 700.

What about your insurance premiums?

Credit scores are not exclusively used by lenders so just because you're not in the market for new credit it doesn't mean your credit scores are no longer important. Credit scores are used by insurance companies, which means your auto and homeowner premiums could go up if your scores go down, warns John Ulzheimer, credit expert at CreditSesame.com.

Think about your credit cards

If you have open credit cards then the issuers are looking at your scores every few months to determine if they still want to do business with you, and under what terms. Many people make the assumption that once your credit card is open that you no longer have to worry about your scores. “This is not true. If your scores go down, your issuer can close your account or increase your interest rate,” says Ulzheimer.

Stuff happens

You simply can't guarantee that you're out of the borrowing market just because you're retired. “Cars break down, roofs need to be replaced, relatives may ask you to co-sign. Forsaking your credit score just because you believe you no longer need it can come back to haunt you,” says Ulzheimer.

Consider your new lifestyle

If you plan on spending your retirement years renting vacation homes and cars then your credit scores are still important. Landlords, property management companies and even rental car companies can and often do pull credit reports and scores as part of their risk assessment processes. “If you're got poor scores, then you may be asked to prepay rent, or you may be denied access to rental properties altogether,” says Ulzheimer.

Home, sweet home

What if you decide that you want to refinance your mortgage or buy a vacation home? You'll certainly want a good credit score, points out Leslie Tayne, financial attorney and debt specialist with the Tayne Law Group.

Know too, that if you decide to go for senior living housing arrangement your credit will be looked at as well, “They will want to know if you an pay monthly, can you pay upfront?” points out Golding.

Or you may need to tap into your home. A home equity line of credit (HELOC) can provide a low interest, tax-deductible, low repayment cash pool. It costs nothing to open the line, it's only when you use it that you pay interest. “The better your credit rating, the lower your interest rate. I recommend everyone establish a HELOC just in case there is a cash need,” says James Heafner, president of Heafner Financial Solutions.

Be squeaky clean

To help keep your score high, pay your bills on time and don't have mountains of debt. Maybe you won't get in a situation where your credit score comes into play. Says Heafner, “But one never knows.” Be in the best position – just in case.

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Anonymous   |     |   Comment #1
All of this is "overrated," in my view.   For example, one can always get a credit card from the bank they do business with and that need not necessarily be a secured one but could be. 

What about insurance premiums?  Most don't need life insurance and with the new healthcare law, the credit score is immaterial.  Some homeowner companies agree not to cancel provided premiums are paid on a timely basis (can only go up by inflation and for the entire rated group).

Home sweet home?  In those states that have "anti-deficiency" legislation (about 10) from the Great Depression, a loan secured to buy a personal residence is non-recourse.  If one "has to walk," can they buy another house?  While is "shouldn't" affect ones credit...what if it does?  What senior would not be glad to sell their home for a nice downpayment in those 10 state knowing that if there is a foreclosure, they can resell again.  And, to that "down and out" buyer, the seller is NOT looking at the personal wherewithall of that buyer since the note is non-recourse!  Thus live in those states where non-recourse in the norm in personal home buying!

Sooooooooo, the banks, etc. are the ones that want one to keep that credit score up.  If that is "your" game, then keep on borrowing and go for it!  But there are alternatives!
bbug   |     |   Comment #2
I think the original post is good advice and anonymous #1 offers nothing constructive.

I don't believe everyone can get a credit card from their bank, nor do I believe everyone can provide security for secured cards. Is he advocating we change our insurance companies and move to states with anti-deficiency legislation rather than keep our credit scores high?