Credit Scores Are Still Important for Retirees to Maintain

Many older Americans may have moved into their retirement years after having paid off their mortgages and taken care of a number of other outstanding balances they may have held for a period of years, but just because this has taken place doesn’t mean it’s not important for any retiree to maintain the good credit score he or she may have cultivated over the last few decades.

While retirees may not think they need credit in their everyday lives as much as they might have when they were younger, there nonetheless exists a number of reasons why maintaining a healthy standing is vital. For instance, credit that older borrowers might need on an emergency basis, to cover costs they might not have been able to foresee, can still be a necessity in some instances, and will consequently require that they have a strong enough score to both qualify and obtain affordable terms. Moreover, many companies that they may not expect to consider their credit — such as utilities providers and insurers — may also run credit checks when they apply, adding even more necessity for maintaining a healthy standing.

So how can seniors improve credit they’ve had for years?

The good news for older Americans is that time is very much on their side. Given the amount of time they’ve been using credit in their everyday lives, they typically have long credit histories and generally good habits, as well as fewer debts in general. All of that can be extremely vital to having a good credit score.

The amount of time borrowers have had all their accounts, on average, makes up a full 15 percent of their scores. This generally means that those who have had credit cards for a long period of time, such as a decade or two — or sometimes even more — will necessarily have extremely high averages in this regard. However, that also means that in general they should try to keep those accounts open and active as much as they possibly can. If they pay off the balances on such an account and close it out, or the cards remain inactive for so long that their lenders cancel them (as sometimes happens), that in turn might lower their average length of credit history and cause a bit of credit damage, and lead to less financial flexibility going forward.

Moreover, though, other factors may be at play for retirees dealing with their credit, which can have bigger impacts on their standings. For instance, those who have been dealing with credit for a few decades may necessarily be a little better at handling their monthly payments responsibly, and that can be vital to maintaining a good standing. Payment history alone makes up 35 percent of a person’s score, and that’s the single biggest consideration there is in making up a rating. For this reason, retirees who still have outstanding balances should make sure to pay their bills on time and in full every month, as missing even one such deadline can have a massive negative impact.

In addition, borrowers who have been able to keep their balances as low as possible will likely have healthier credit than those who carry larger debts into retirement. This is because having balances of more than 30 percent of their total available limits will serve to significantly reduce scores because this factor, known as “credit utilization ratio,” likewise comprises another 30 percent of a person’s score. For this reason, the more debt a retiree has, the lower their scores will be, and the only way to deal with this issue is to make larger payments into these accounts every month as a means of more comprehensively reducing them going forward. Fortunately, though, the average amount of credit card debt carried by older people is significantly lower than that for other age groups, which both makes them more likely to not have to worry so much about these concerns. This can also put them in a better position to deal with whatever problems may linger going forward when it comes to paying down those debts to a more reasonable level.

It’s also important to check credit reports

One thing many older Americans may ignore even if they have generally healthy borrowing habits is the necessity of checking their credit reports with regularity. This may help them to potentially identify any unfair markings which may be having a negative impact on their standings in general. If any such issues are discovered in the course of a routine check, it might be helpful for retirees to contact a credit repair company in an effort to help deal with the issues. This may in turn put them in a better position to deal with their credit going forward.

Posted in Credit Score
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