Credit Scores and Reports

Debt-free seniors may find themselves unscorable

Congratulations! You've paid off your mortgage and all other debt. But you may have lost something else in the process: your credit score


Seniors who pay off their mortgages and cars may be free from a life of debt, but in return they may be shackled with a new problem: the inability to get a credit score.

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Seniors who pay off their mortgages and cars may be free from a life of debt, but in return they may be shackled with a new problem: the inability to get a credit score.

Liz Greenwood, credit counselor with the nonprofit Philadelphia-area group Clarifi, says that not only may seniors not realize they could end up “unscorable,” they may not even see it as a problem.

But not having a score can be a big problem as landlords, utility companies and banks may want to see that number to gauge their risk in providing services, even if the applicant has a long, sparkling credit history.

In a November 2016 blog post, leading score maker FICO said its data show there are about 53 million American adults. Of them, 7 million can be labeled “credit retired.” These Americans are unscorable because they have no recently active or updated accounts and no payment blemishes. In short, they have walked away from credit because they’re all paid up. Their average age is 71. (See chart: “Types of credit unscorables.”)

Minimum requirements for a credit score
FICO says a consumer’s credit report has to have three things to generate one of their scores:

  • An account at least six months old.
  • An account updated by a creditor or lender within the past six months
  • No death notice on file.

For the “credit retired” group, the median length of time since the last account update is 4.5 years, according to FICO. Their appetite for new credit is extremely small, as well: Only 1 percent to 4 percent apply for credit cards, FICO said.

Why seniors may still need credit
If a person has only new or substantially inactive accounts or no open accounts whatsoever, FICO can’t produce a score. And if you’re a senior who has dutifully paid off all debts, you could easily feel the effects of that in these situations:

  • Downsizing to an apartment.
    Count on getting your credit score checked if you sell your home and switch to renting. Cynthia Osofsky, who approves tenants for several single-family and student buildings she owns in the Philadelphia area, says, “Absolutely I check FICO scores.” She said she likes to see a score above 700 before she offers a tenant a lease.
  • Getting utilities after moving to a new community.
    Utility companies including FirstEnergy Corp., a power company for six states in the Northeast, and Inland Power in Spokane, Washington, are among those that say they check a FICO score to see whether a customer needs to put down a deposit before he or she can get an account. Patti Michel, a former spokeswoman at FirstEnergy, says that without a score, you’d have to plunk down a $200-$800 deposit, depending on what state you live in.
  • Moving into a nursing home or other assisted living facility.
    About 10 percent of seniors end up in senior housing, and they have to go through the same type of credit approval process as apartment dwellers.
  • Co-signing a loan.
    Say you want to help out a child or grandchild with a major purchase or lease. The lender will check your score to be assured you can cover it if your loved one can’t.
  • Getting the credit limit you need.
    Circumstances may require you to get a credit card in your own name for the first time. Not having a credit score doesn’t automatically keep you from getting a card, a Wells Fargo representative says, but not having a credit score can keep you from getting the credit limit you want. FICO reports that 90 of the top 100 largest U.S. financial institutions use its scoring model in making consumer credit decisions.

Barrett Burns, president and CEO of VantageScore Solutions, another leading credit score maker, says this last situation occurred recently in his own family. A financially secure female relative went to get her own credit card at a major bank after her husband died, and the bank only gave her a $400 limit.

“I was outraged,” Burns says. “How in the world could this happen? Well, she didn’t have a credit score, so I saw it up close and personal … We recommend people keep at least [one] credit card alive and probably in two names” – one for each spouse, Burns says.

Karen Carlson, director of education for InCharge Debt Solutions in Orlando, Florida, gives an example of a relative of hers who had been a renter in the same neighborhood for more than 50 years. Because he knew everyone and hadn’t been using credit, no one ever needed to pull his credit score, she says. But then he moved to a new town to be closer to family, and he discovered he had no score to help him start over. “It’s not that unusual for people in their 80s,” she says.

Although people in FICO’s “credit retired” category have a small appetite for debt – fewer than 5 percent have recently applied for credit – they have better scoring potential than other “unscorables.” FICO conducted an experiment to find out how people who can’t be given scores now would fare if it relaxed its scoring standards. Eighty percent of the unscorable population who would achieve a score of 620 or above were in the “credit retired” category.

FICO is not likely to ease its scoring criteria, but for those seniors who have found themselves in the unscorable crowd, the fix is relatively easy. You just need to jump-start credit activity so the scoring models know you’re alive and can start churning your information into a score. For instance:

  • Get a secured card.
    You dont necessarily need a credit score to get one of these, because you spend only what you have loaded into your account. Just make sure the issuer reports to all three credit reporting agencies, says VantageScore’s Burns, so that you can build a good credit history and eventually transition to a traditional credit card.
  • Use a credit card to pay for something small, such as gas.
    If you have a card you’ve paid off and just aren’t using, this will fix the problem. Be sure to pay it off each month, Greenwood warns, or you’ll accumulate fees and interest and trade one credit problem for another.
  • Have one of your regular bills automatically charged to your card.
    Having a phone or life insurance payment charged to your new or reactivated card eliminates having to remember to charge something occasionally to keep your account active.

For a generation that had paid off accounts and lived without credit for decades before credit cards were widely used, however, heading back into using credit is hard, Burns says. Paid-off mortgage notes, for example, were such a celebrated life accomplishment that it used to be a tradition to literally burn the note at a mortgage-burning party. “Prudent people didn’t borrow, especially if they got close to retirement age.” 

“These people [seniors] are products of the Great Depression and the second World War,” says Carlson. “There’s a lot we can learn from them, but maybe the thing that they can learn from us is it’s very helpful to maintain a credit score.”

Carlson wants to make it clear that, once their credit is active again, seniors should keep paying off bills and that maintaining a healthy credit history does not mean living beyond their means.

“You do not have to actually have debt to have a top-notch credit score,” she says.

Segment Size Median age Why can’t they be scored? Typical credit application rate
Credit retired7 million71Only old account data on file – median time since last account update is 4.5 years1-4%
Credit impaired18 million43Only old account data on file – median time since last account update is 34 months20-30%
New to credit3 million24Less than 6 months of credit history – not enough to accurately rate risk35-40%
No traditional credit file25 million25No data at the credit bureau35-40%
Source: FICO

See related: Assisted living facilities, nursing homes often perform credit checks

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