A whole lot of people approach retirement with a serious misconception about credit scoring.
A recent study from TransUnion indicates that almost half of Baby Boomers think that credit scores don’t matter as much after age 70.
Guess what? They do.
Generally speaking, seniors aren’t applying for mortgages or refinancing existing ones in their eighth decades. But a low credit score affects insurance premiums, auto loan interest rates and, maybe, getting accepted for long-term care.
Folks edging toward retirement with moderate to poor credit – or no credit – need to think about how they might handle any financial surprises. Even if you think that Social Security plus pension/retirement plan will let you live a cash-only lifestyle, you’re better off owning and using credit cards.
Life does tend to throw curveballs. Suppose during retirement…
- Your home needs an expensive fix (e.g., sewer line full of tree roots).
- A car gets totaled and insurance doesn’t cover the cost of a new one.
- Your spouse has a stroke and suddenly the house needs a wheelchair ramp and grab bars.
Can’t put off dealing with such things, but you might not have enough cash to cover the costs, either. A decent credit score will help you get a decent loan rate. Or you might choose to pay with an existing credit card and apply for a 0% balance transfer card. Depending on the card you’d have up to 21 months to pay it off.
Getting and using credit
Some older women don’t have any credit at all. Consumer advocate Beverly Harzog often hears from widows and divorcees who never dealt with the family finances. That makes it darned tough to build credit scores in their own names.
If that’s you, or someone you know, start taking steps to fix it. Harzog’s blog is an excellent resource. For example, she recently she wrote about an alternative credit bureau called eCredable, which uses non-traditional info to calculate a credit score; at least one card issuer will use eCredable’s scoring.
Harzog also reviews other credit cards, reading all the fine print so that we don’t have to. (Note: She doesn’t earn money through affiliate relationships with card issuers).
Once you’ve got a card, don’t overdo it. Charge only what you know you can pay off in full when the bill arrives. For example, you might use it only for the weekly groceries and your cellphone bill.
Elders should be sure to guard their cards, especially if their homes get a lot of traffic (e.g., cleaning service, in-home care). Make sure the cards are locked up along with all other important papers.
(Heck, we should all be careful. One couple I know had a card stolen by a visiting relative, which cost them thousands of dollars.)
Don’t sign your life away
The TransUnion study also noted that some grandparents might want to co-sign loans for their kids or grandkids. Personally, I think that’s a terrible idea.
Yes, it can be tough to get credit when you’re young or coming off a divorce or personal finance disaster. However, an elder could set himself up for disasters of his own by agreeing to cover someone else’s bills.
Instead, guide the person toward other options, such as:
Joining a credit union. Although there’s no guarantee, they tend to be more flexible and understanding.
Applying at eCredable. Use the link to Harzog’s site to find out more.
Getting a secured credit card. Use it wisely and eventually they’ll take off the training wheels and offer grown-up plastic. The key is to keep using it wisely after that.
Readers: Had you ever thought about keeping up your credit score as you age?
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Excellent post, Donna. We definitely are keeping our credit scores in mind. I learned a long time ago about their importance. Almost 35 years ago a guy I was dating at the time tried to buy a new car. He didn’t have any credit cards plus lived at home with his mom. Dealership told him he didn’t have enough credit history for them to do financing. He had to come up with more cash. I had never heard of that before and I have never forgotten that.
Life can change in an instant (e.g., car accident, serious illness). Having credit cards and a decent credit score can help us cope with the aftermath.
Thanks for reading, and for leaving a comment.
That sounds like some good information to take forward as I am planning for retirement years. You are so right when you say you just never know what life will bring in the future.
I have helped my kids through life and put my retirement savings on hold several times…I tell myself that I cannot do that any more. These last 15 years of work my retirement is priority and must come first. Now just to get thru the next 15 years …. God Willing!
Agreed — your job is to take care of yourself later by implementing careful planning now. If your kids even think of doing any victim-muttering, ask them point-blank if they’re prepared to have you move in with them when you retire and if they think they can afford to pay for all the things you’ll need at that point.