Having a good credit score has many benefits, such as lower interest rates, loan approval, and negotiating power. However, many people who are approaching retirement are under the impression that their credit scores no longer matter. In fact, many seniors are tempted to go “cash only,” which will ultimately hurt their credit scores.
If you’ve ever wondered why credit scores matter, you’re certainly not alone. Here are some reasons why having a good credit rating is important for older adults, and some tips on how to build good credit.
What a Good Credit Rating Means
An excellent credit rating is 750 or higher, while good credit is considered to be between 700 and 749 and a fair score between 650 and 699. However, each lender has its own definition of what score is “good enough,” and some are more selective than others.
Credit scores are calculated from a collection of data in your credit report and they are then grouped into categories. Payment history is a huge part of this calculation, as well as your debt. To a lesser yet still important degree, length of credit history, credit mix, and new credit are other factors that make up your score number.
Why Credit Score Matters in Retirement
There are many perks to having good credit in your retirement years when your working days are over. For example, many seniors who retire take this as an opportunity to start a second career, or follow a passion they never had time for in the past. Having a good credit score means that you are more likely to secure a loan and raise capital to help your new venture take off.
More Wiggle Room
Here are some additional reasons why having a good credit rating is important during the retirement years.
- Opportunity to refinance your mortgage if rates drop
- Get approved for a car loan
- Obtain a new credit card
- Manage your insurance premiums
- Get better credit card rewards for travel
- Obtain a mortgage
- Be financially prepared for a medical emergency
How to Maintain Good Credit in Retirement
The rules for maintaining a good credit rating in retirement are much like the rules to follow in your younger years, with a few key variations. Here are some tips on how to have good credit at this exciting and transitional time of life.
- Review your credit report annually and check for errors
- Pay off smaller debts now
- Keep old credit cards active, even if you don’t use them
- Increase your credit card limits but don’t use it
- Set up payment reminders so you don’t miss bills
Selling Your Annuity Payments
For retirees who have a debt to pay off, there are a number of ways to help your credit score. One way is to sell annuity payments that you are receiving because of a personal injury settlement, lottery winnings, or other unique cash flow. If you have a settlement or annuity that you are considering selling, contact Novation today to learn about your options and get one step closer to enjoying the benefits of financial freedom.
*Novation is not a financial advisor or consultant and strongly recommends that you speak to a lawyer or accountant before making any significant financial decisions.
