Does Your Credit Score Matter Anymore When You Are Retired? Experts Explain
Smart people spend their earlier years, from their 30s through their early 50s, saving for retirement and working to keep their credit score high. Those who are really savvy begin saving and building credit in their 20s.
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By now, most of us know that a “good” credit score, which FICO defines as above 670 to 739, is your ticket to lower interest rates on loans, better credit card offers and a host of other benefits. Scores of 740 and higher, considered “very good” to “excellent,” can unlock even lower rates and more perks.
But did you know that your credit score also matters after you retire? “Many people in their 50s, 60s and beyond think they no longer need to worry about maintaining good credit scores,” said Sean Fox, president of debt resolutions at Achieve in San Mateo, California. “Not true! Credit profiles and credit scores are still important in retirement.”
While you may not be looking to take out a mortgage to buy a home after retirement, there are still several good reasons to keep your credit in tip-top shape in your 60s, 70s and beyond.
Secure the Lowest Interest Rates If You Need a Loan
People take out loans for many reasons throughout their working life: mortgages, car loans, even business loans. While you might pay cash with proceeds from the sale of your last residence if you downsize your home after retirement, you could need a loan for any number of other reasons.
“Credit scores can have a real effect on the ability to borrow any money — and on interest rates associated with any loan,” said Fox, pointing out that you may need a personal loan to cover unexpected expenses, or a business loan to launch a second career in your later years.
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Finance Medical Expenses Over Time
If you need to finance any medical bills or procedures, good credit can also help you secure a lower rate. With healthcare costs totaling as much as $157,500 for a 65-year-old over the length of their retirement, according to a Fidelity study, medical bills can be a significant expense. Medicare typically doesn’t cover all costs, so a high credit score can be a saving grace when it comes to affording medical expenses in retirement.
Qualify for a Lower Mortgage Rate
It’s also true that some people still take out mortgages in retirement, depending on the housing market in their area and their financial situation. With interest rates so high right now, the savings of a few mortgage points on a home loan could lead to savings of hundreds of dollars a month.
Move Into the Apartment of Your Choice
Even if your years of homeownership are done, a good credit score can also help you get into the apartment or senior living community of your choice. “Credit scores affect far more than just the ability to get a loan or a good interest rate on a loan,” Fox said. “They can affect the ability to rent an apartment.”
Pay Less for Auto Insurance
In addition to helping you secure a lower interest rate on a car lease or auto loan, your credit score can affect your insurance rates. If you’ve been lax about on-time payments or keeping your credit utilization ratio low in your retirement years, it could affect how much you pay for car insurance, according to Fox. “Many auto insurance companies look at credit scores as they determine rates,” he said.
Get a Better Part-Time Job
If you find that you need — or want — to work in your senior years, a good credit score can help you find a more desirable or better paying job.
“While credit checks happen most often when hiring for positions involving access to sensitive/private information, or larger amounts of money, some companies may look at scores to get an idea of an individual’s personal responsibility,” Fox said.
Jobs in the legal field, casinos, accounting and other industries may all check your credit before hiring you, according to Self.
Score a Top-Tier Travel Rewards Credit Card
Lastly, if your retirement involves traveling and vacations, you’ll want to maintain your credit to gain access to top-tier rewards credit cards. Using credit cards on vacation can be more secure than carrying your debit card or using cash. But today’s best travel rewards cards also gain you access into exclusive airport lounges, points you can cash in for flights or hotel stays — and benefits like trip cancellation insurance, lost or damaged luggage coverage, etc.
The Bottom Line
In essence, you want to maintain, or build, a high credit score in retirement for the same reasons you want good credit throughout your working life: to enjoy lower interest rates, top-tier rewards cards and better jobs or places to live.
It’s also important to keep tabs on your credit regularly to spot fraud when it happens. A significant drop in your credit score from any monitoring service is a red flag to check your credit report for signs of fraud or identity theft.
“Know how and why to check your credit reports regularly — then do it,” Fox advised, explaining that you can get free reports from Equifax, Experian and TransUnion at AnnualCreditReport.com. “After reviewing reports carefully, if there are any errors, the best way to get them corrected is by following the directions on each agency’s website.”
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