Maintaining a good credit history throughout your lifetime is a worthy goal, but retiring with good credit is even more important for a variety of reasons. When you’re young, it seems like you have a long time to rectify bad credit scores, and you do. However, if you wait until too late in life to try and improve them, you may face retirement with marginal credit, which can affect your retirement years dramatically. If you have good score sense, credit will not be a problem during retirement; but if you don’t have a good sense of your score, retirement can be a struggle.
Each credit bureau uses your credit report to calculate a FICO number – also known as your credit score. Fifteen percent of your total FICO score is based on the length of your credit history. As you near retirement, it’s more difficult to repair accounts that have not been kept in good standing because they have a long negative record and a short positive record of payment. This will lower your credit score, and it may be impossible to reverse. A free credit report will show you where you presently stand with all of your accounts.
Taking out short-term credit, like credit cards, also damages your FICO scores. In retirement, it may be difficult to make ends meet financially, and relying on credit cards as supplemental income may seem to be the panacea. As tempting as it is, avoid opening new credit cards and incurring debt, because you need your credit score to be high just in case you need it for other reasons.
If each credit bureau reports a low credit score at the time you retire, improving that number will be much more difficult because you will have less debt and fewer credit accounts during retirement. If you wait until you retire to borrow money short term, it will count against your score, not help it. And no retiree wants to take on long-term debt just to improve a credit score.
Retiring with a good credit score is important because so many different institutions today use your credit history to determine if you’re trustworthy and reliable. It doesn’t matter whether it’s accurate or fair, it’s just a reality. And the number of companies using your credit report is rising, so the trend is likely to continue, making your credit score even more important in the future.
If you need to get a job after retirement to supplement your income, your potential employer will likely pull your credit reports to see if you’re reliable. If you want an insurance policy, the insurance company will most likely check your credit before determining the premiums. And if you need to move out of your house and into an apartment, the landlord probably will check your credit score as an indication of how responsible you’ll be about paying rent on time. If your score is low, you may have to pay a higher security deposit, or your application might be denied altogether.
Check your credit status now by getting a free credit report from each of the three credit bureaus. Do everything you can to improve your credit scores before you retire, because after that it will be very difficult to raise low credit scores, and so much of what you may want to do during retirement can be impacted by those scores. Subscribing to a credit monitoring service like ScoreSense can help you get your credit back on track to ensure that you enjoy retirement.
If you want to have your credit scores in excellent shape before retiring, subscribe to ScoreSense at www.ScoreSense.com. They can help you make sense of your credit scores, and help you get your credit reports in shape to raise your scores.