September 15, 2020
Shawn Lane
Consumer Credit Expert
When most people think about financial planning, retirement is the logical finish line. You work hard, live within your means and save enough money to live out your days in peace and comfort.
But you don’t stop managing your finances after you retire – and that includes your credit. While your days of applying for mortgages and small business loans may be over, there are still a few good reasons to maintain a respectable credit score.
Why You Should Maintain Good Credit
Even during retirement, there are several reasons you might want to continue managing your credit. If you’re planning to travel, opening a travel credit card can help maximize rewards. These cards usually require an excellent credit score, about 700 or higher.
If you want to buy a car and take out an auto loan, you’ll need good credit to qualify for the best terms and lowest interest rates. If you have poor credit or no recent credit history, you may have to pay a higher rate or contribute a larger down payment.
Some retirees plan on selling their homes and downsizing to an apartment later on. Most landlords will run a credit check. If you have a poor credit score, they may decline your application or charge you a higher security deposit.
Retirees who want to help their kids or grandchildren by cosigning on a loan can only do so if they have good credit. A consumer with poor credit won’t be accepted as a cosigner.
You’ll also pay less in car insurance (as well as homeowner insurance) premiums with a good credit score. If you still have a mortgage, consider keeping a good credit score in case you want to refinance the loan.
How to Maintain Good Credit in Retirement
If you already have good credit, maintaining your score isn’t difficult. Payment history counts for 35% of your credit score, so paying your bills on time goes a long way. Set up autopay if you’ve been paying your bills manually.
Keep your oldest credit cards open to maintain a strong length of credit history. Put a recurring monthly bill on the card, set it to autopay, and then check your account every month to ensure it went through.
Monitor the credit utilization on your credit cards and try to keep it below 10%. Credit utilization refers to how much credit you’re currently using compared to the amount available, and accounts for 30% of your credit score.
Avoid opening new accounts, as this may decrease the average age of your credit history. It’s alright to open one or two new accounts a year, but make sure the benefits of the loan or credit card outweigh the downsides of taking a small hit to your score.
Watch for Fraud and Scams
You should also review your transactions every month to watch for fraud. A fraudulent transaction can be an indication that someone has stolen your identity and may be opening new accounts. This could lead to a significant drop in your credit score if they open an account, run up a huge balance and then default.
It is very important to monitor your credit, or at least review your credit reports on a regular basis. There are many good credit monitoring companies that will allow you to review all 3 of your credit bureau reports in a single place, and you will be alerted if there are any new credit applications in your name or if anything changes on your credit reports. We suggest Identity IQ, which you can access for just $1 (7-day trial) on our website www.frscredit.com/creditmonitoring. There are also many free options but be sure to monitor all 3 credit bureaus. At an absolute minimum, you should check your credit reports once a year, which you can access for free each year at AnnualCreditReport.com.
Lastly, you might consider a credit freeze. A credit freeze means potential lenders and credit card companies won’t be able to view your credit report, so you (or any scammers) won’t be able to open any new accounts. If you install a freeze and want to open a credit card or take out a loan, you can thaw your credit and then refreeze it once the account has been established.
Installing a credit freeze will help prevent identity theft and scams, which is especially important if you have a spouse experiencing a cognitive decline or increased susceptibility to scams.
We can help you reach your credit goals. Schedule a free credit analysis with a Financial Renovation Solutions credit consultant today.