Maintaining good credit in your golden years

credit report or credit score feature cover

As published in the Star Advertiser on December 4, 2018.

One little three-digit number could have a huge impact on your finances, affecting your ability to rent an apartment, buy a car or get a credit card. Your credit score gives lenders a quick glimpse into your creditworthiness, taking into account your payment history, credit history and amount owed as a measure of how likely you are to pay future loans.

According to FICO, the gold standard of credit scores, the average score in 2017 for an individual over 60 was 743 out of 850 — the highest of any age group. Kupuna tend to have higher credit scores than other age groups for a few different reasons. They may have older accounts that include many different types of credit (e.g., a mortgage, car loans and credit cards), all of which have a positive effect when calculating a credit score.

Additionally, lenders look carefully at the total amount owed when assessing creditworthiness. Seniors have often been able to pay down or pay off debts that plague younger borrowers, such as student loans, which boosts their score.

Although they have higher scores on average, seniors may believe their days of applying for credit are behind them, and that they no longer need to pay attention to their credit score. However, there are a few important reasons why seniors should maintain their high credit score into their golden years.

Why does good credit matter for seniors?

People with “excellent” credit scores, generally defined as anything over 750, usually enjoy lower interest rates on loans. Many seniors choose to downsize to a smaller house or condo, or refinance their existing home, so a high credit score will lead to a more favorable rate. Additionally, seniors interested in renting will usually need to pass a credit check before their rental application is accepted.

Credit scores aren’t just used by lenders. Many insurance companies may also reward good credit with discounted rates on home and car insurance. For a senior on a fixed income, reduced rates can help keep expenses under control.

As your children and grandchildren get to an age where they are taking out student loans, car loans and mortgages, you may wish to help them out financially. Co-signing on a loan will give them the benefit of your higher credit score, but it can be risky. If the other person doesn’t hold up their end of the deal with timely payments, it could ruin your credit and leave you responsible for their debts. Make sure your co-signer is trustworthy and understands his or her payment obligations.

Finally, seniors wishing to travel the world may want to apply for credit cards with high-value rewards, such as airline miles and other travel benefits. The most appealing rewards cards are often only available to consumers with top-tier credit scores.

How to maintain a high credit score

Here are some tips to help ensure that your credit score remains in top shape as you get older.

  • Age of accounts is an important factor for credit history. Keep your old credit cards open, even if you no longer use them. Every few months, make a small purchase on these cards to keep your accounts active. Just remember to pay your bill when you put charges on these rarely used cards.
  • Enroll in online bill pay and use automatic payments to ensure you never pay your bills late. Be sure to pay your credit card bills in full every month to avoid accruing high-interest debt.
  • Don’t apply for too many lines of credit all at once. Credit card companies like to entice individuals with excellent credit by offering free airline miles or store discounts for signing up. Your credit will take a hit if you submit too many different credit applications within a short period of time, so be selective.

No matter how old you are, do what you can to keep your credit score high. You never know when your excellent credit will offer financial benefits for you.

Financial Educator, Jennifer Russo headshot

About Jennifer Russo

Jennifer Russo is Hawaii State FCU’s financial educator. She develops, markets and delivers financial resources to members under the credit union’s financial literacy initiative. She also works with community partners to develop strategies addressing the unique needs of Hawaii’s diverse population.

Jennifer has more than 15 years of experience in marketing and program management within the federal government and private industries. She received her Master of Business Administration from Colorado State University in Fort Collins, Colorado, and holds a bachelor’s degree in mass communications and public relations from McNeese State University in Lake Charles, Louisiana.

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