You’ve entered your retirement years. Finally, you no longer have to worry about getting up early in the morning for work, dealing with traffic, job stresses, or worrying about your credit score.
We were with you until that last one.
Statistics suggest that you will enter retirement with a higher than average credit score. A December 2016 report from Experian shows the average VantageScore credit score of Americans aged 70 and above was 730, while Baby Boomers (ages 50 to 69) averaged 700. Both compare well to the overall average score of 673.
However, you shouldn’t take your score for granted. MoneyTips wants to give you five good reasons why your credit score is just as important in your retirement years as it was in your working years.
1. Existing Debt – Are you still paying on your mortgage? Do you have an outstanding auto loan, or even a student loan where you are a co-signer? Do you continue to use a credit card? Creditors periodically assess your situation and retain the right to raise your interest rate, lower your credit limit, or otherwise alter your credit terms on existing accounts based on a lower credit score, among other factors.
2. Reduced Insurance Rates – The same credit report information that is used to calculate your credit score is also used by insurance companies to help determine your insurance rates (based on the risk that you present). Gerri Detweiler, Head of Marketing Education for Nav, relays the story of her fiscally responsible father: “He got a notice from his insurance agency that he didn’t get the best rate on his auto insurance because of his credit score. And it wasn’t because he doesn’t pay his bills on time; it’s just that he doesn’t have much credit.” Don’t let that happen to you!
3. Moving/Downsizing – Even if you own your home outright and are happy living there, circumstances may change as you age. You may have difficulty maintaining your home, decide to move closer to your grandchildren, or you may need to take out a loan to renovate your home and make it more senior-friendly. In any of those cases, you will need a decent credit score to qualify for the loan that you will need.
4. Traveling – Do you plan to see the world upon retirement, or will you be making frequent trips to see the grandchildren? Regardless of your reason for travel, a good credit score will be required for you to qualify for credit cards that offer the best travel perks along with a low interest rate. You may find that it pays to upgrade your credit card.
5. Emergency Expenses – At some point during your retirement, you may face a large and unexpected expense – and cash reserves only go so far. Uncovered medical expenses are especially troublesome as you age. It’s wise to have available credit to serve as a buffer to absorb that expense, and since you are likely to carry a balance for some time, you need a good credit score to qualify for the lowest possible interest rate on that balance.
MoneyTips hopes that you are entering retirement with reasonably good credit and all you have to do is continue with the responsible financial behavior you normally exhibit. If not, it’s even more important that you work on your credit score in retirement. Check your credit score regularly, keep a few lines of credit open (but not too many), keep your credit utilization low, and make sure that you make your payments on time – and enjoy your retirement while you are at it.