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8 ways seniors can build and keep good credit in retirement

If you think you no longer need to take care of your credit after you retire, think again. Here’s why you need to – and how to achieve it


Whether you want to downsize, travel the world or find a side job, maintaining stellar credit is key to reach your retirement goals. These tips will help you leverage credit to succeed financially once you retire.

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You’re heading for retirement with the nest empty, the mortgage paid off, tennis racket in hand and the grandkids on speed dial. Who needs to worry about credit scores anymore? Those days are over, right?

Not so fast. There are plenty of reasons why you need a good credit score in retirement. And if you don’t have one now, there are ways you can rebuild it.

See related: Should you postpone retirement to pay off card debt?

Why you need good credit in retirement

  • Maybe you’ll want to buy a smaller home, or one that’s more senior-friendly. You might need credit for other big purchases, from replacing a worn-out car to repairing a driveway.
  • If you’re planning to travel, a good travel credit card can help you earn free flights or hotel stays. And cash-back cards can help defray gas, car rental and RV rental costs. You’ll need good credit to get one of those rewards cards, if you don’t have one already.
  • You may also need to undergo a credit check for non-borrowing reasons. You may decide to move into an apartment that requires a credit check, or apply for a job to supplement retirement income or alleviate boredom.
  • A good credit score can even lower your car or home insurance premiums if your insurer uses a credit-based insurance score. According to the National Association of Insurance Commissioners, approximately 95 percent of auto insurers and 85 percent of home insurers use credit-based insurance scores in states where it’s legally allowed (it’s banned in Hawaii, California and Massachusetts).

“Last, but certainly not least,” says Martin Lynch, director of education for Cambridge Credit Counseling in Agawam, Massachussetts, “any seniors considering an assisted living facility or nursing home will almost certainly undergo a credit check, to ensure that the new resident will make timely payments.”

How to build and keep good credit before and during retirement

Any existing creditors you have won’t necessarily know that you’re retiring. It won’t be indicated on your credit report, nor will your age.

Even your income doesn’t factor into your credit score. If your nice big paycheck is being replaced by smaller retirement and Social Security payments, no one at the credit bureaus will be the wiser.

Ideally, you’ll prepare your credit before you retire.

There are a number of things you can do to get your credit in tiptop shape. If you have already entered retirement with a damaged credit score, it may be harder to build it back up, but it can be done.

1. Take care of past-due bills

Lynch advises cleaning up any delinquent accounts before you retire. But don’t let your retirement date tempt you to settle the bill for less than the full amount, if at all possible.

“Even if it takes a while, paying off the account in full sends future lenders a more positive message,” he says.

FICO 9, the latest FICO scoring model, will disregard old collection accounts that have been paid off completely. Many lenders have not yet adopted FICO 9, but they’re expected to eventually.

2. Pay down credit card debt before you retire

Your credit utilization ratio accounts for 30 percent of your credit score. One way you can suffer from high credit utilization is by having high credit card balances compared to your credit limits.

In the run-up to your retirement, concentrate on paying down those balances. Some people recommend your utilization be no more than 30 percent but the lower your credit utilization ratio is, the better – not only your overall utilization, but also on each individual account.

See related: Carrying debt while approaching retirement on the rise

3. Keep existing credit cards open and active

It can be tempting to close credit cards once you pay them off, but that might raise your credit utilization ratio and reduce your credit history, which accounts for 15 percent of your credit score.

Keeping those accounts active will ensure they will remain open. Banks close credit accounts that haven’t had been used for a long time because it costs them money to keep them open.

That doesn’t mean you have to run up balances on your credit cards. You can charge a small amount – for example, a recurring charge, such as a gym membership or Netflix subscription – on them every month and pay off the balance in full.

4. Consider freezing your credit

Unlike in the past, you can now freeze your credit free of charge. Freezing your credit means no thieves who have stolen your information can open new accounts in your name. If you want to apply for new credit, you’ll have to unfreeze your report, but that’s also now free.

If you don’t plan to apply for new credit any time soon it makes sense to freeze your credit file, says Rod Griffin, director of education at the credit bureau Experian. “You can still use your existing accounts.”

5. Check your credit report regularly

Identity theft can happen at any age, but elderly people are particularly vulnerable because they’re seen as good targets, according to the FBI. Unfortunately, even those close to you may be a threat. Family members or caregivers sometimes steal credit cards and use the accounts.

  • You can find out by monitoring your credit report on a regular basis.
  • You’re entitled to one free credit report from each of the three credit bureaus once a year from AnnualCreditReport.com.
  • Space them out by checking one report every four months.
  • Look for any unusual activity, such as new accounts that you didn’t open yourself.

Errors can also hurt your credit – check your credit report for those, too. You can dispute credit report errors for free.

Credit monitoring won’t prevent fraud, but it can help you recognize fraudulent activity so you can contact your bank before it becomes a larger problem.

6. Stay alert to scams and fraud

There are lots of resources online to help you spot scams and fraud.

  • Most state attorneys general post information about the latest scams in your area.
  • The Consumer Financial Protection Bureau has a downloadable guide called Money Smart for Older Adults.
  • AARP sponsors a fraud watch network that anyone – whether you’re a member or not – can use for free. You can read about scams, sign up for fraud alerts and access information from law enforcement in your area.

“If someone calls you up and says they’re with your credit card company and asks for your Social Security number or something like that, don’t provide that information,” says Trawinski. “Follow up directly with the credit card company. Call the customer service number on your credit card and ask to speak to someone.”

7. Open new credit accounts to build credit – sparingly

If you’ve let your credit accounts lapse, you may be in the same Catch-22 situation as young people who are new to credit. You need good credit in order to build credit.

Fortunately, under the Equal Credit Opportunity Act, banks can’t discriminate against you based on age or the fact that you’re retired when considering whether to grant you credit.

Experian’s Griffin suggests asking your bank for a credit card if you’ve got significant savings or a retirement account there. “They may be willing to open an account for you so that you have a credit account you could use to build your credit history.”

You may also want to ask a relative with good credit card habits to make you an authorized user on their account. You don’t even need to make any purchases yourself. Your relative’s responsible behavior on that account will positively impact your credit report.

Another option to build credit is to open a secured credit card.

  • Secured cards come with low credit limits and usually require you to pay a deposit equal to the card’s credit limit.
  • Pay your bill on time every month, and within six months or so you may be eligible to upgrade to an unsecured card.

But make sure you don’t run up large balances on the unsecured card – or any card for that matter – in order to keep the good credit that you’ve worked so hard to build.

8. Consider ways to get other on-time payments added to your credit report

The previously mentioned FICO Score 9 includes rent payments if your landlord reports them to the credit bureaus.

You can ask your landlord to report your on-time payments to the credit bureaus. FICO 9 also includes other types of noncredit payments.

Experian has also introduced a similar platform called Experian Boost.

“If a person is, regardless of age, trying to build a credit history or re-establish credit history, they’ll soon be able to give us permission to include utility payments and cellular telephone payments as part of their credit history to help boost their credit scores,” says Griffin.

Experian says in a pre-launch test of the service, 75 percent of consumers with credit scores below 680 saw an improvement in their credit scores. Depending on their score, 5 to 15 percent moved into a better score category – for example, subprime to near prime.

Follow the steps above and you could see your credit score improve, even if you’ve gone into retirement with credit challenges.

Once you’ve got that good score, work hard to maintain it so that you can have access to credit when you need it.

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The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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