Do you believe your credit score loses importance during retirement? Think again. Even after you’ve retired, your creditworthiness plays a vital role when applying for new credit cards, borrowing money, or securing certain types of insurance.
According to Rod Griffin, senior director of public education and advocacy at Experian, retiring doesn’t mean you stop needing access to financial resources. Maintaining a good credit score remains a critical part of your financial toolkit, ensuring it’s available to work for you when necessary.
So, don’t underestimate the value of your credit score during retirement. It’s crucial to stay proactive and regularly check your credit report even after retiring.
Per the law, every year you can receive one free credit report annually from the most popular credit reporting agencies: Equifax, Experian, and TransUnion. However, due to COVID-19, these reports have been accessible for free weekly, a policy expected to expire by the end of 2023. To request complimentary copies of your credit report, visit AnnualCreditReport.com. Be cautious of fraudulent websites that may try to charge you or compromise your personal information.
Griffin suggests reviewing your credit reports at least once a year to identify any errors that could negatively impact your score. He points out that identity thieves often target older adults, and falling victim to such fraud can harm your credit. Regularly checking your credit report enables you to take action on any discrepancies.
In 2021, a study by Javelin Strategy & Research, cosponsored by AARP, revealed that nearly 42 million adults experienced identity fraud, resulting in a total cost of $52 billion for consumers.
Whether you have a generous income or a fixed budget, remaining active with your open accounts is crucial to safeguarding your credit score. Griffin explains that even with significant available credit, it won’t hold much value if you never utilize it. Accounts showing no activity within the past three to six months may be excluded from your credit score calculation.
To prevent this, there’s no need to overspend. However, keeping a few accounts open and using them periodically is advisable, ensuring you pay off the balance in full each month. The aim is not to accumulate debt or pay interest but to demonstrate to creditors that you are actively using your credit cards. Griffin emphasizes the importance of timely bill payments, maintaining low balances, staying active with credit, and regularly reviewing your credit report.
Additionally, maintaining a good credit score during retirement can offer several benefits. For example, it allows you to access credit if you need it for unexpected expenses or emergencies. A strong credit score makes obtaining loans or credit cards that offer better terms and lower interest rates easier.
Moreover, your creditworthiness can impact your insurance premiums. Some insurance companies consider credit scores when determining the cost of your premiums.
Having a high credit score will come in handy if you are downsizing or relocating during retirement. If you’re contemplating selling your home, buying a new one, or relocating to a different area, having a high credit score significantly enhances your likelihood of obtaining a favorable mortgage rate or obtaining rental housing with favorable terms.
Also, situations can arise where having a good credit score becomes essential. For instance, you may need to co-sign a loan for a family member or assist them financially. Your creditworthiness will play a role in determining whether you can provide the necessary support.
Don’t forget that your credit score will continue to hold significance during retirement. It is essential to stay proactive, regularly monitor your credit report, and take steps to maintain a good credit score. By doing so, you can enjoy the financial advantages of a strong credit standing and be prepared for unexpected financial needs in your retirement years.