All through our adult lives we’re continually reminded of the importance of paying our bills on time. One of the chief benefits: a high credit score, the Holy Grail of good money management. With a high credit score, we’re told, credit card companies, mortgage companies and car loan companies will be tying themselves in proverbial knots to do business with us. Without a good credit score, we are doomed to a sub-prime life of sky-high interest rates and limited financial options.
High Credit Score Continues to Pay Dividends
But what about when you finally retire? Is it okay to lighten up and stop worrying about keeping your credit score healthy? Financial experts say no, it’s not okay. That credit score can still be a huge help to you long after you quit regular employment.
Recently we came across this article on the USNews website that provides some helpful insight into this issue. “Do You Need Good Credit in Retirement?” the article asks – then it answers its own question: “A high credit score continues to be helpful after your working years.” Written by contributor Rachel Hartman, the article acknowledges that keeping a good credit score is extremely important during our younger years when mortgage rates and car loans depend on what the credit bureaus have to say about us. “However,” she writes, “certain factors related to credit change when you enter retirement. You might not have a mortgage anymore, and have no plans to purchase another car.” When TransUnion surveyed baby boomers in 2017, only about one in six listed maintaining good credit as one of their top financial priorities in retirement. Clearly for most boomers, keeping a good FICO score isn’t high on the To Do list.
Some Unexpected Pitfalls of Poor Credit Scores
However, maybe it should be. “Before brushing credit to the side, it’s important to carefully consider whether you will need credit during your retirement years,” says USNews. You might not anticipate the need to apply for credit when retired, but circumstances can change, and you might be surprised at how important that good credit score might prove to be. The USNews article outlines several situations in which good credit might save you money while poor credit might severely restrict your options. For example:
- Renting an Apartment: “Landlords will often run a credit check for a new tenant,” says the article. If it’s a toss-up between competing tenants for a desirable apartment, a good credit score could make the difference.
- Buying Insurance: Believe it or not, your credit score can affect your rates for auto and life insurance. A past article in Consumer Reports explains the process. “You might not know that car insurers are also rifling through your credit files to do something completely different: to predict the odds that you’ll file a claim. And if they think that your credit isn’t up to their highest standard, they will charge you more, even if you have never had an accident.”
- Getting a Job: It’s possible that, once retired, you may decide you want to go back to work, at least part time. But will your credit rating get in the way? It might. A website called Balance Careers says, “Employers use credit reports to judge how responsible and financially stable you are. The results of a credit check can hinder your chances of getting a job offer if your credit report isn’t top-notch.” Again, if you’re one of several applicants, bad credit could be a deal-breaker.
- Getting a Better Credit Card. While we strongly suggest retirees use credit cards judiciously, you might find that a better interest rate or other perks make switching cards a good idea. But as USNews says, those prime deals are generally available only to those whose FICO scores pass muster.
A Sound Financial Strategy
These are just some of the many reasons why keeping a good credit score should be an important part of your financial strategy in retirement. The process is actually fairly simple, says Hartman in USNews. Start by paying your bills on time, which is the most important factor in your credit score, accounting for 35 percent of the final number. Try to pay off any lingering credit card and loan balances and be sure to stay current. Also, “if you have a credit card with a long, solid history, consider hanging onto it,” says Hartman. “The longer you hold a card, the more valuable it is in your credit score determination.” If you don’t want to use the card, tuck it away, but don’t close the account.
As we said above, as important as money is, there’s much more to retirement planning than finances. A truly comprehensive plan for your retirement future also needs to help ensure that you’re making the right housing choices, that you and your estate are well-protected legally, that you have the right kind of medical insurance, and that your family is supportive of your desires as you age. The only retirement planning tool we know of that does all this is a LifePlan from AgingOptions, and if you’ll invest just a little bit of your time Rajiv Nagaich will gladly show you the power of this retirement planning breakthrough. Come join Rajiv at a free LifePlanning seminar at a location and time that works for you. You’ll find a complete calendar of currently-scheduled seminars on our Live Events page, where you can register for the LifePlanning Seminar of your choice.
In a recent Forbes magazine article, columnist Jamie Hopkins said, “Those who have retirement plans in place have a happier, less stressful, and more financially secure retirement.” If that sounds good to you, come and learn about the benefits of an AgingOptions LifePlan. Age on!
(originally reported at https://money.usnews.com)
(Image courtesy of www.goodcreditscores.com)