You may need good credit to get old
Assisted living facilities, nursing homes often perform credit checks
By Carmen Chai
You're in retirement. You've paid off your mortgage and consumer debt. So no more worries about maintaining good credit anymore, right?
Wrong. Experts, say that even in your senior years, good credit can still come in handy as a tool that may secure your comfort. Without it, you may encounter trouble convincing assisted living communities or nursing homes that you're a reliable candidate.
"What people don't realize about seniors' care is that it's not covered by Medicare. Nursing homes and assisted living centers require private payments," warns Andy Cohen, chief executive officer of Caring.com, a resource for adult children looking after their aging parents. Seniors "need savings to fund it, and they need to fill out an application and that's when a credit score comes into play."
Ultimately, 10 percent of the senior population ends up in senior housing. "They have to go through the credit process to get approved just like they're getting an apartment. People don't realize how important it is," says Cohen.
Credit, savings key
to securing costly service
Assisted living facilities (ALFs) come with a hefty price tag. Paul Cornell, CEO and chairman of the American Seniors Association, says monthly fees could clock in at $5,000 a month for middle-of-the-road nursing homes.
Seniors who need full-time or specialized health care for conditions such as Alzheimer's, for example, could easily pay in excess of $100,000 in annual fees for around-the-clock access to nurses, medical support and meals.
"You can easily spend 10 years or more in an ALF. That would be a long time, but you're looking well into the high six figures," Cornell says.
There's never a time where you don't need a good credit score.
Green Path Debt Solutions
If seniors have the cash to pay upfront, credit doesn't hold as much weight. But that's a rarity, he says.
This is where good credit -- proof that you can manage debt and payments responsibly -- comes in. A good credit score helps convince these facilities that the patient has a good record of on-time payments and will use whatever income they have -- from Social Security, pensions, savings, asset sales and even family financial contributions -- to pay the institution.
Kathryn Bossler, a financial counselor with Green Path Debt Solutions in Detroit, uses the analogy of a credit check for renters looking for an apartment. "It's like a landlord wanting you to pay your rent on time. This is something longer term," she says.
4 reasons seniors' credit
scores may decline
The experts say this often gives seniors and their families a wake-up call. "Seniors may own their homes and cars free and clear so credit may not be as high of a priority as it was once in their lives," Bossler says.
"This is a good reminder that life changes and your needs change. There's never a time where you don't need a good credit score. It's being considered for more and more parts of our lives, so at any age you can see how your credit keeps more doors open for you," she says.
If you're being turned down by a nursing home, you should look at what's going on with your credit report and address issues head-on. There are four chief rewasonbs seniors credit scores may decline. They are:
There are recurring mistakes on seniors' credit reports, according to Kenneth Chaplin, senior vice president of product, marketing and analytics at TransUnion. Fraud, for example, is one of the most common reasons seniors end up with bad credit. In these circumstances, their marred record could be because of a crime that was completely out of their hands.
People aren't necessarily active in the credit world and not having that history has potential to negatively impact the score.
As a senior, your job is to check your credit record to make sure the information is accurate. You can get one free credit report every year from each of the three major credit bureaus -- Experian, Equifax and TransUnion -- at annualcreditreport.com. Seniors can also sign up for credit monitoring services so that the credit bureau will alert them anytime someone tries to pull their credit report.
2. Missed payments
In checking your credit report, you may come across errors made on your part, such as missed medical payments. Seniors often receive a mixture of financial coverage from the government, private insurance and savings, but they may miscalculate and end up with a debt that isn't accounted for.
"There may be a gap and if it isn't addressed, it can be on someone's credit report," Chaplin says.
3. High credit
Closing credit cards may hurt your credit score. Thirty percent of your credit score comes from your credit utilization ratio. For example, you've got two credit cards, each with a $1,000 credit limit. One of them carries a balance near that $1,000 limit, the other has no balance. If you close the card with a $0 balance, your utilization ratio could double.
"That in itself means you have a higher credit utilization that could have a negative impact. You have less available credit and that has the potential of being negative on your score," Chaplin says.
Inactivity doesn't affect your score, but if you're carrying cards without using them for months on end, they could be closed without your consent. That could harm your utilization ratio and your length of credit history, another important factor in FICO credit scores.
"Sometimes credit scores and trade items get a little thinner at that age," Chaplin says. "People aren't necessarily active in the credit world and not having that history has potential to negatively impact the score."
Make sure your accounts don't go dormant, he advises.
How to repair your
credit score for assisted care
Don't go knocking on creditors' doors asking for a new line of credit or a credit card just to rack up a bill, though, Chaplin warns.
If you're in a strong cash position and not carrying a lot of debt, don't incur debt. That could put you in worse shape.
It's hard for those who have stopped using credit, but the experts say you don't need to live in debt or carry a balance to have a good credit score. Simply use credit as a payment tool and pay off your debts immediately.
"Have a credit card or an available line of credit, utilize it to pay for groceries and pay it off. That keeps your credit active," Chaplin says.
How you manage your credit may pay off for your kids, too, he warns. They may need you to co-sign or act as a guarantor on loans they're trying to secure. "Don't just let your credit go. Have an account you're managing responsibly," Bossler says.
Published: March 7, 2016
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