Blog posted On October 21, 2020
Your credit score can make or break many financial opportunities – mortgage loans, car loans, getting hired for a job, and more. For years, you’ve been carefully paying your bills on time, keeping your credit balance low, avoiding debt, and doing everything you can to maintain a good credit score. Now, as you head into retirement, you have a fully owned home, a paid-off car loan, no outstanding debt, and no intention of getting a full-time job. You don’t think you’ll be borrowing money anytime soon and you begin to question if you really need to keep up with your credit score once you head into retirement.
Most financial experts agree that maintaining a good credit score is important for all adults – both working and retired – for one or more of the following reasons.
Auto Insurance Rates
While your car loan might be paid off, auto insurance companies (outside of California, Hawaii and Massachusetts) will often reference your credit report to help determine your insurance rate. Lower credit scores could lead to higher auto insurance premiums, even if you have a good driving record.
Line of Credit Negotiations
When requesting an increase on your line of credit, you may assume that the decision of your card issuer will be based on your account activity. However, lenders will often treat a line of credit negotiation like a request for a new account, and therefore will reference your credit report.
Retirement Community Applications
The application process for some retirement communities is a more in-depth process than some might believe, oftentimes involving a background and credit check. While some senior living facilities do not request credit reports, many long-term facilities do. For some facilities, it varies because they are strictly landlord-tenant relationships. For Continuing Care Retirement Communities (CCRCs) specifically, credit reports are almost always checked because the community wants to ensure that the applicant can pay both the down payment and monthly charges.
Arguably, the most important factor affected by your credit score when you’re in retirement is your ability to take out personal loans for unexpected expenses. Unexpected expenses can range from medical emergencies to essential home repairs. Accidents happen, and a good credit score can make it easier to take out a personal loan when they occur.
Maintaining a good credit score after retirement may not seem necessary, but it is a good idea. You’ve most likely already established good credit practices, such as making timely payments, keeping balances low, and monitoring accounts for fraudulent activities. In addition, it’s best to keep your accounts open and active since the length of your credit and amount of activity (or lack thereof) can also affect your credit score. Continue practicing these good credit habits into retirement, and you will likely maintain a good score.
Stepping into retirement is a big change for your lifestyle and finances. Consider talking to a financial advisor to help you adjust to retirement and provide you more information on credit scores and best credit practices.