Read on for the benefits of maintaining a strong credit score, and how to do so.
Benefits of a strong credit score after age 50
Lenders review your credit score when you apply to borrow money so they can decide your loan options, including what your interest rate will be. But they aren’t the only financial firm that is crunching your numbers. Insurers often use credit scores to gauge your risk and set higher premiums for people who have lower credit scores. For example, a typical homeowner with a low score will pay almost $2,000 more per year (or twice as much) for their home insurance premium than a neighbor with an identical profile but a high credit score, according to a report from the Consumer Federation of America.
Landlords may also review your credit report before approving your tenant application. While your days of taking out personal loans and securing mortgages may be over, you may need a home equity line of credit (HELOC) in the future. Some retirees use their home equity to cover expenses, and lenders will check your credit score when reviewing your application and offering options.
How to keep your credit score strong
There are several things you can do pre-retirement and in retirement to help maintain a strong credit score.
Keep your credit active as you age
The length of your credit history is a key component of your credit score. Having older accounts boost your average account age, which may justify keeping no-fee cards open. You can set up a small automatic charge each month and pay it off to maintain the account’s activity.
Monitor your credit
Platforms like Experian, Equifax and TransUnion let you monitor your credit and receive notifications about any changes. You can get a free copy of your credit report each year from each of the three companies.
It’s good to check your credit report regularly to ensure there are no fraudulent accounts or errors. You can contact one of the credit bureaus to correct any information about late payments, outdated items and other details that may be hurting your score. Each credit bureau has a straightforward disputing process that can help you correct mistakes.
Make payments on time
A key part of maintaining a good credit score is making payments on time.
Setting up automatic payments can ensure you make the appropriate payments even if you forget to check your financial accounts.