Keeping a Good Credit Score during Retirement
Keeping a good credit score requires a lot of effort and commitment, especially as your time to retire draws closer. While it may not be wise to make large purchases after retiring, keeping a good credit score will ensure that you’ll still qualify to use your accounts if the need arises. Below are a few tips that will help you keep your credit score as high as possible throughout retirement.
Use or Risk Losing Old Accounts
It’s not enough to simply keep old accounts open; they need to be used from time to time to prevent the creditor from closing them without warning. If you’re fortunate enough to be debt-free, it’s even more important for you to use your older accounts every so often – otherwise credit bureaus will not have any information to base your credit score on. Several older folk have been taken by surprise after being denied loans because they had been debt-free for a number of years.
It’s not necessary to incur large amounts of debt to ensure that your credit score remains active. Even making a single, smaller purchase occasionally and paying for it the following month will normally work well.
Don’t Close Accounts you’ve had for Many Years
Several individuals don’t know that keeping a good credit score on an account over many years will have a positive impact on their credit ratings.
If you’re going to retire soon, you might have various accounts that you opened many years ago that you’re tempted to close off. However, closing all of these will unfortunately have a negative effect on your credit history.
Another way in which your credit rating can be affected is if you decrease the amount of credit that is available for you to use. Quite a large part of an individual’s credit score depends on the amount of credit that has been granted to them versus the amount of credit that they are using. As such, reducing your amount of available credit can have a negative effect on your overall score.
Don’t Co-sign for any Loans
If you have children that have left home, it can be tempting to lend a helping hand by co-signing on a student loan or car note for them. However, this is not recommended because it will significantly increase the amount of debt that is reflecting on your credit history. Although this might not always have an effect on your credit rating, it could affect your ability to qualify for a loan if your debt-credit ratio is overly high.
Take your Debt into Consideration before Retiring
Another aspect that affects your credit score is your ability to repay debt installments on time each month. This could be problematic if you’re going to be living on less income after you retire or if you experience unexpected medical bills that eliminate your savings. It’s normally recommended that you eliminate as much consumer debt as possible before retiring.
After retiring, unexpected expenses can arise that will require you to apply for a loan. Protecting your credit score now will help ensure that you’ll be prepared to do so with ease in the future.