Preserving your Credit Status Now to Stay Financially Sound After Retirement
It’s no secret that hard work and commitment are required if you want to obtain and keep a high credit score, especially if you’re coming close to retirement. Below are some aspects to consider that will go a long way in helping you to preserve your credit score beyond your golden years.
Don’t Close Long-held Accounts
Keeping a good record on any type of open account over a number of years has a highly positive effect on your overall credit score. If you’re close to retirement age, you may have accounts that were opened several years ago that you might be tempted to close out. However, doing this will have a negative effect on your credit score virtually immediately.
Another way your credit score would be negatively affected is by decreasing the amount of credit you have available to you. A large percentage of your credit score depends on the amount of overall credit you have versus the amount you’re actually using, so decreasing your level of available credit will cause a drastic drop in your score.
Don’t Cosign any Loans
After your kids have moved out, it can be tempting to cosign for them to get their first car or obtain a student loan. However, doing this will increase the level of debt that is showing on your personal credit report. Although this won’t necessarily affect your credit score overall, it can negatively impact your ability to secure a loan in future if your credit to debt ration appears to be too high.
Use Old Accounts Occasionally
When considering your credit score, it’s not good enough to just keep older accounts open – they will have to be used from time to time to prevent creditors from closing them unexpectedly. Using your older accounts every now and then is especially important if you’re currently debt-free, because otherwise the credit bureaus would have nothing to base your score on. Unfortunately, a number of retirees have discovered this too late after being denied loans when they’d not carried debt for several years.
There’s no need to accrue large amounts of debt to keep a credit score active. Just making the occasional purchase and repaying it the following month will usually suffice.
Review Existing Debts before Retirement
A fair percentage of your credit score is based on your ability to repay debt installments on time, and this could become a huge worry if your income decreases drastically after retiring, or if an unexpected medical emergency depletes your savings. Before you stop working, ensure that you’ll still be able to save some money each month and repay all outstanding debts ahead of time wherever possible.
Unexpected events can happen even after you retire, which could result in you needing to apply for a loan. Taking the above measures to protect your credit score now already will help ensure that you’ll be financially prepared for anything that may happen in future. If you would like to find out more about planning for your retirement, contact our advisors today.