Think your credit score doesn’t matter in retirement? If you want to open a new credit card, borrow money or obtain certain insurance, your creditworthiness comes into play even after you stop working.
“Retiring doesn’t mean you stop living, it doesn’t mean you no longer need access to financial resources,” says Rod Griffin, Senior Director of Public Education and Advocacy at Experian. “Maintaining credit is an essential part of your financial toolkit, having it there to work for you if you need it.”
Access to credit can also save your life in an emergency or if it means you don’t have to dip into your savings to cover an expense. It is also a money saver. A good credit score can be a way to get discounts and offers from a cash back credit card or a percentage back at a retailer. “People think credit is about debt, but it’s not. It’s about having another financial tool to leverage,” says Griffin.
According to Experian, a credit score between 800 and 850 is considered exceptional, while 740-799 is considered very good and 670-739 is good. Anything less than that and it can be more expensive to borrow money. This could mean you have to post collateral or pay a higher interest rate.
The good news for retirees is that your credit score does not depend on your income. You can have a fixed income and still have great credit, says Bruce McClary, spokesperson for the National Foundation for Credit Counseling. In retirement, how you manage your credit is what matters.
If you pay your bills on time, keep your balances low in proportion to your credit limits, and limit the number of accounts you open per year, your credit score should stay intact. But that doesn’t mean you can forget it. McClary says retirees should stay informed by checking their credit reports from Experian, TransUnion and Equifax, the three credit reporting agencies, at least annually. Everyone should do it, but especially older people.