Credit scores define your financial freedom in today’s day and age. Whether you like it or not, you credit score can significantly impact your quality of life, especially in retirement.
Abide by these simple rules throughout retirement, and you’ll enjoy a high retirement credit score.
1. Keep Old Credit Cards Open
History is important. The longer your credit card is open (and of course, in good standing), the easier it will be to maintain your score.
Payment history is roughly 35% of everyone’s credit score. An older credit card card will have a longer history.
If you make a mistake and miss a payment, it’s one small blemish on years of good payments, and it won’t affect as much.
So long as you use your card a few times a month, it will maintain your credit score.
If your older card isn’t one that you use often, it’s still smart to keep it around. Closing out older credit card accounts can actually hurt your credit.
Consider making extremely small purchases on your card and paying them off quickly. Five dollars of gas here, small convenience store purchases there; just keep the credit card open and minorly active.
2. Prioritize Bills That Could Affect Credit
We’ve all had to prioritize bills based on their due dates before. If a bill could negatively affect your credit score when it goes past the due date, do your best to make it a priority.
Paying off the other bills is important, but if you can do without them for another week, then it is best to do so.
If you have problems remembering which bills affect your credit, sit down and write out a list.
Set up those bills to be paid automatically with your bank’s online bill pay option, or automatic payments through the bill provider themselves.
It takes the guesswork out of it all, and maintains a proper bank record if you ever have to dispute a payment not showing up for whatever reason.
3. Consolidate Credit Cards
If your credit card is in good standing, that’s a good thing. If you have six credit cards open, that’s a bad thing.
We talked about keeping credit histories open earlier. The longer the history, the better, so it’s time to close out a card or two with the shortest history. In this instance, it might actually help you out.
Having a large number of open accounts looks poor on your credit report.
If you’ve cosigned loans for grandchildren or are still paying off your mortgage, those are active loan accounts and will be placed next to your open credit cards when determining your score.
The sweet spot for open accounts is three or four. Any lower and you might not have a scorable financial history; any higher and you may be seen as untrustworthy or impulsive to the credit bureaus.
4. Pay More Than Your Minimum Card Statement
This is an age-old technique to improve your credit score, but also works well for staying in good standing with your credit card provider.
If your minimum payment is $40.00 per month, aim for a 25% higher payment of $50.00. It doesn’t have to be a huge difference, but it will shine positively on your credit report.
Record-keeping is always something you should do, even in today’s digital age. Get a copy of your payment confirmation that states the minimum payment as well as the actual payment made, and keep a file on it.
5. Dispute Errors on Your Credit Report
Inconsistencies and problems on credit reports is a growing problem.
There are common mistakes that arise on credit reports all the time, from incorrect personal information to duplicate accounts. Dispute these as soon as possible.
If you don’t dispute errors, it’s as good as accepting that they actually happened.
The three major bureaus are constantly handling hundreds of millions of users credit, and clerical errors are bound to happen.
When you dispute an error, it can still take up to ninety days to be wiped off of your credit report.
It is wise to request a confirmation letter stating that this was an error, and that it is being removed.
The ninety day period won’t affect you too much, except that it might come up if you were to open a new line of credit.
Wait until the period has ended before pursuing anything that involves a credit check.
6. Avoid Applying for New Credit
Seniors should maintain their current credit line accounts (cards and loans) and avoiding opening new ones.
If you are currently on a fixed income and apply for new credit, even with a good credit score, you could still be denied.
Either that, or you will be accepted, and possible have more lines of credit than the magic number. That could impact your score.
Applying for new credit also takes a hit on your credit report. If you are working to maintain your credit and not increase it, you can’t afford any negative marks.
7. Know Your Creditor
Credit rating systems can seem very cold and lifeless, but there are real people ready to help you.
We have a negative societal view on credit companies, so give them a call to iron out any issues or ask for information that is specific to your case.
You might find that there are smaller ways to boost or maintain your credit rating through tools that are readily available to your creditors, and to you.
Contact them to get a direct line to someone who can help you.
Get their extension for faster access if you need future issues resolved (we all know how long the wait can be for an arbitrary connection).
Can a Retired Person Get a Credit Card?
Under the Equal Credit Opportunity Act, you cannot be discriminated against getting a credit card based on age.
However, there are financial differences between age and retirement, which do come into play.
You cannot be denied a credit card because of where your income stems from.
If your primary income is through social security, that won’t disqualify you from getting a credit card. However, the frequency of your income is a factor.
SSI benefits that only come in at the beginning of the month mean you’re only earning an income once a month. That can affect your ability to get a credit card.
Other aspects of retirement could work against you for getting a credit card, such as:
Frequency matters, but so does the amount. Just because you can’t be disqualified for having an SSI-based income doesn’t mean that you can’t be disqualified for the amount of money you get.
If this number vastly contrasts your pre-retirement income, this could work against you.
Paying Off Your Mortgage
It’s good to pay off your mortgage, but it’s also a closed credit account (loan).
Even if the mortgage ends in good standing with no missed payments over your loan term, you are now down by one credit account.
Not Using Credit
If you don’t use it, you lose it. You should already be using a credit card intermittently throughout the month, even if you’re paying off the full balance immediately after using it.
Maintaining open credit with a long and positive history is paramount if you want to acquire another credit card in the future.
Co-Signing A Loan
You have something called a debt-to-income ratio, and when you co-sign on a loan (generally for a grandchild’s student loans or a child’s mortgage), you’re putting yourself in a bad credit situation.
Your name will be associated with that account, whether it’s positive or not. It’s as good as taking out a loan in your own name, and will majorly impact your credit.
These are a few of the things that could work against you while trying to get a new credit card. If you’ve been denied for a credit card, there’s something you can do to work around it.
Get a secured credit card. It costs a couple hundred up front, and works as a debit card that builds your credit. Eventually, you can graduate to an unsecured credit card and build your credit further.
How Does Age Affect Your Credit Score?
Your birth date doesn’t immediately impact your credit score; it’s about credit history, not personal age.
Having a long credit history in good standing will undoubtedly be good for your credit.
What’s better is that when you only have one or two late payments on a twenty-year credit account, it doesn’t make much of an impact.
If you were to close out that twenty-year credit line, it would hit your credit score. Hard.
Payment history is tied to that credit account. It accounts for 35% of your credit score. When you close the account out, it no longer impacts your ongoing credit score, which will force it to decline.
You could also take a big hit all at once when you close that account out. Even if you sparsely use the credit account in question, keep it open.
If you have never had a credit account, or have not had a credit account for a long time, that will negatively impact your credit.
Maintaining credit accounts as they age is important; don’t close them out.
Can I Get a Loan if I am Retired?
Yes, you most certainly can get a loan when you are retired, but you might have to explore roundabout ways to get one.
Different loans have different requirements. Car loans and home loans will have different requirements than personal loans.
You also have to factor in secured loans versus unsecured loans.
Secured loans are like mortgage and auto loans, while unsecured loans are lump sum amounts of money with no collateral through a contact.
If you fail to pay your auto loan, they seize the car. If you fail to pay an unsecured loan, they have to collect—that proves far more difficult.
It is much easier to get a secured loan in retirement than it is an unsecured loan. If you are able to comfortably make payments for a shorter term loan, this could also help you.
While this could mean higher monthly payments, it will also lower the interest that you will pay over time.
The more money you can put down (upfront) on the loan, such as an auto loan, the more likely you are to be approved for one.
It’s important to keep in mind that when applying for a loan, you will need to have copies of all financial data that may be relevant: closed credit accounts and their standing, previous mortgage statements, recent credit reports, and anything else that could help you out. Keep a current portfolio at all times.
How do You Keep Your Credit Score High?
Keep your credit utilization low, but existent.
The higher your credit card limit is, the higher your credit score will be—if you use the card. The most responsible way to do this is to have the money set aside already.
Purchase something simple, such as your groceries or gas, with your credit card. Then use the money you already have to make a payment in one week.
Your card needs to be active, but with a low balance. Maintaining less than 30% of your total credit card utilization will look good on your credit report.
Keep it even lower, and you might even be eligible for a credit line increase from your card provider.
If you are responsible and know nobody else has access to your card, accept the credit line increase.
Credit card providers report the good and the bad to the three major bureaus.
When your credit report shows that you have maintained a low utilization and received an increase, and you aren’t being reckless with that newfound amount, your score increases.
Maintaining this will keep your retirement credit score high without costing you any additional money.
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