For someone to have a bad credit after retiring is not good, rather they should strive for good credit. A good credit is essential when it comes to determining your financial health. If you are in need of a loan to begin a business, buy a home and purchase a car, your credit score determines your ability to borrow and the interest rate you will pay.
It is better to build a good credit habit earlier in life and care for it even at retirement. Even if you do not intend borrowing at retirement, put the following into consideration:
The Effect of Closing Credit Card Accounts | Credit Score Management Tips For Retirees
Your credit score can be affected if you close your credit card at retirement, especially if you still carry balance the time the account was closed. This due to the fact that a significant part of your credit score is determined by your credit utilization ratio. That is the amount of available credit you are using.
If you wish to close a credit card at retirement because you do not plan to use it again. Just make sure you pay off the balance because it affects your credit utilization, which can affect your credit score negatively. So pay off your balance to minimize any harmful effects of shrinking your credit limit.
The Effect of Credit on Tapping Home Equity.
Being a retiree, you can finally make home upgrade or repair that which you had wanted to repair for long. You might have accumulated a sizeable amount of home equity or you are now mortgage- free, then you may consider borrowing to do that which you wish, through a line of credit or a home equity loan. If that is your wish, your lender will consider your credit rating as part of the application and approval process. That is an excellent credit score will bring about easier approval and a lower rate on whatever you borrow.
For those who wish to get additional income in retirement, a reverse mortgage is a way to access your home’s equity. Just that your income and credit score are not that important in this scenario. That is to say, no minimum credit score is required to receive a mortgage.
Cosigned Loans and its Effects on Your Credit Scores |Credit Score Management
To co-sign on a loan, either before or in retirement can affect your credit score seriously. You can co-sign on a home loan, car loan or student loan for one of your children or grandchildren.
If you are the co-signer, you have shared legal responsibility for the debt, even if you are not the one to pay back. If your co-signer falls to meet obligation on the loan you signed your name, debt collectors may come after both of you to recover the debt. And you may be subjected to a civil debt collection lawsuit. If found guilty, your individual retirement account or other income may be garnished, or your bank account is frozen, base on where you live.
( Know that no state allows 401(k) assets or social security advantage to be garnished for debt collection) .
The Effects Of Credit Scores On Your Insurance Rates.
Your credit score is very important if you want to save money on car or homeowners insurance in retirement. Apart from Hawaii, California, and Massachusetts other states allow car insurance companies to see your credit before you are approved for a policy. And it can be used for homeowners insurance.
The possibility that you may file a claim or how much risk you are can be the gauge by insurers using your credit profile. The premium you will pay to an insurance company is determined by your credit history and credit score. Base on how high or low it is.
Is Travel a Big Part of My Retirement Plans?
You can open a travel rewards credit card that gives miles or point on purchases, and other money-saving travel perks to achieve your aim. But, many top-self travel cards that give premium rewards and benefits, does that base on your qualifications and credentials.
The annual percentage rate you are to pay for a travel rewards card is based on your credit score. Regular and early monthly payments are the surest way to avoid interest charges, but when you charge a more expensive trip, you will need a little more time to pay off. So this is when your credit score can make a difference in how much the interest charges add to the total.
The Best Way to Maintain Good Credit in Retirement.
It is good to have developed an excellent credit habit before retirement. But maintaining this good score at retirement, you will have to follow these steps:
- Pay your bills early.
- Maintain a low credit balance
- Apply for new credit sparingly
- Leave older accounts open
- Use different types of credit
But if at retirement your credit score is not high, you can use these steps above to improve your credit rating. You should always supervise your score monthly and check your credit report regularly for warning sign of identity fraud. To enable you to stop an identity thief from destroying your credit score.