As a retiree, you likely know that having good credit is essential to your financial health. You know that the score assigned to you by the major bureaus, such as TransUnion, will have a direct impact on your ability to borrow and the interest rate you will pay on any loan you take out.
If you have established good credit habits earlier in life, it can help you nurture that good score in retirement. If you are not yet retired but are thinking about doing so in the next several years, it is important to establish those good habits that you can carry with you into your retirement years.
Even if you do not plan to borrow during your retirement, there are still questions you should ask yourself to ensure your credit remains intact now and in the future.
How Will Closing a Credit Card Account Affect My Credit Score?
Your credit utilization ratio is the amount of credit you have available to you compared with the amount you are using. If you close a credit card account and there is still a balance on the account, it will negatively affect your credit score. If you have a credit card account and you want to close it in retirement because you do not intend to use it, pay off the balance first so it will not hurt your utilization rate and therefore, negatively affect your credit score.
Is Credit Taken Into Account if I Tap My Home Equity?
It is not uncommon for a person to have accumulated a lot of home equity by the time they are in their retirement years. It is also very common for retirees to want to make upgrades to their home, repairs they had been putting off, and other improvements. To do this, retirees often consider tapping into their home equity either through a line of credit or a home equity loan to help pay for the maintenance project.
If you want to tap into your home equity to help you pay for jobs you will do around the home, your lender will consider your credit score during the approval process.
Like many questions that surround credit scores, this is one with many answers. For example, if you tap into your home equity by taking out a reverse mortgage, your credit score and income level are not given as much weight as they are when taking out a home equity loan.
Will Cosigning a Loan Impact My Credit Score?
Many retirees have established good credit before retirement so they are in a good position to cosign loans for their children. These loans are typically for student loans, home loans, and vehicles. While this is a very thoughtful gesture, you should consider how it will impact your credit score; it could drastically affect it.
When you cosign a loan, you are legally responsible for the debt, even if you are not the only one paying it back. If the person you are cosigning for does not repay the debt, the debt collectors can come after both of you to recover the amount owed.
The action they take may involve a debt collection lawsuit. If the debt collector is successful and wins the lawsuit, you may have your wages garnished, or your bank account may be seized. However, it is important to note that your 401(k) assets and Social Security benefits cannot be garnished to collect on a debt.
How Will My Credit Score Impact My Insurance Premiums?
In Florida, auto insurance companies are allowed to check your credit before they approve you for a policy. An insurer providing you with homeowners’ insurance can also check your credit score before approving you for a policy. Insurers check credit scores when determining how much risk a certain person poses, and they correlate it with how likely you are to file a claim.
Having a good credit score can help you secure a lower insurance premium, so you pay less. On the other hand, if you have a low credit score, you may have to pay a higher rate and you may even be denied coverage altogether.
Do I Want to Travel During Retirement?
It is a dream of many to travel during their retirement years and to do so, you may want to open a travel rewards credit card. These cards offer rewards, such as Air Miles, on many different purchases people make every day so they can receive a deal when they travel. There is a catch to these cards, though, and that is that you must have an extremely good credit score to qualify. The annual percentage rate you will have to pay can also be affected by your credit score and the higher your score, the lower the rate the credit card company will charge you.
How Can You Maintain Good Credit in Retirement?
Many people think that when they reach retirement, they do not have many of the worries they once had. While that may be true for many things, your credit score is not one of them. To ensure you maintain a good credit score during retirement, it is important to continue with the good habits that helped you achieve a good score in the first place. These include paying your bills on time, not applying for too much credit in a short timeframe, and keeping older accounts open.
Our Debt Defense Lawyers in Florida Can Help when Collectors Take Action
Unfortunately, retirement does not shield you from harassing debt collectors who want to collect on a debt. If a debt collector has threatened to take legal action against you, our Fort Lauderdale debt defense lawyers are here to help. At Loan Lawyers, our attorneys have the necessary experience to defend against these lawsuits, and we want to put our experience to work for you. Call us today at 954-807-1361 or contact us online to schedule a free consultation.
Loan Lawyers has helped over 5,000 South Florida homeowners and consumers with their debt problems, we have saved over 2,000 homes from foreclosure, eliminated more than $100,000,000 in mortgage principal and consumer debt, and have recovered over $10,000,000 on behalf of our clients due to bank, loan servicer, and debt collector violations. Contact us for a free consultation and find out more about our money-back guarantee on credit card debt buyer lawsuits, and how we may be able to help you.
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Loan Lawyers is made up of experienced consumer rights attorneys who use every available resource to develop comprehensive debt solution strategies. Our goal is to take on those burdens, resolve those problems, and allow our clients to sleep soundly knowing they are on the path to a better future.
