It would be nice to think you could let things slide. But, no, you do need to maintain good credit in retirement.
It will save you money or hassles in more situations than you may realize. And bad credit can cost you in retirement just as it can cost you during your working years.
Consider these reasons that it pays to keep a stellar credit score in retirement.
1. A new job
You may want to go back to work after retiring, or change jobs if you still work part-time. Good credit can make a difference to a potential employer.
Some employers run background checks on job applicants. This process commonly includes checking applicants’ credit reports, according to the U.S. Federal Trade Commission.
2. Credit checks
Businesses such as insurance companies and service providers don’t stop checking your credit after you retire. So, having bad credit can still hurt you in retirement.
For example, a consumer with bad credit may pay more for insurance or have to put down a deposit to receive service from a utility or cellphone company, says Patrick Whalen, a certified financial planner at Whalen Financial Planning in Los Angeles.
He tells Money Talks News:
“It is not fun to have a kid working at a cellphone store treat you like a poor credit risk. You’ve worked hard, saved and lived below your means, but it will be necessary to maintain a good credit score in order for you to receive the respect that you have earned.”
3. Financing deals
Say you are making a big purchase like a mattress and want to take advantage of a 0% interest financing offer.
You will need good or excellent credit to get such deals, says Mark Wilson, a certified financial planner at MILE Wealth Management in Irvine, California.
4. Your credit cards
If you want to keep your credit cards the way they are, then you’ll want to keep your credit score up.
“Some credit card lenders will cancel your current card if they see big drops in your credit scores,” Wilson tells Money Talks News.
5. Home repairs
Good credit can make it easier for retirees to pay for home repairs, says Becky House, a spokesperson for American Financial Solutions, a member of the National Foundation for Credit Counseling.
“Maybe they will need to repair a roof or replace an appliance on a home they own,” she tells Money Talks News. “They may need to use credit to take care of those issues.”
Will a younger family member need a co-signer to take on a debt, such as an education or car loan? Will a relative need a co-signer to secure a big purchase or rent an apartment? To lend a hand, you will need good credit, House says.
Of course, just because you can co-sign a loan doesn’t mean it’s a smart financial move. A 2016 survey by CreditCards.com found that 38% of co-signers ended up having to repay at least part of the debt themselves because the primary borrower failed to repay it.
Money isn’t the only thing you stand to lose when you co-sign a loan, though: Your credit score can suffer if the primary borrower fails to repay the debt or pays late.
7. Getting and refinancing loans
Still paying on your mortgage? You’ll want to keep your credit in tip-top shape so you can get the best interest rate possible should you refinance.
“More and more homeowners are still making mortgage payments after they retire, and might find themselves in a better position after refinancing,” says Bruce McClary, a spokesperson for the nonprofit National Foundation for Credit Counseling.
Should you decide after retiring to take out a new mortgage — or take on a car or home equity loan, among other types of debt — you also will want good credit. Again, having bad credit when looking to borrow can lead to high interest rates.
McClary tells Money Talks News:
“A poor credit rating can make it more costly for seniors to borrow in those situations, and can lead to additional financial pressures on budgets that are already stretched thin.”
8. Long-term care
Should you or your spouse move into an assisted living facility in the future, you’ll want good credit when you apply.
The facility could review your credit during the process of vetting you, says Maria Erickson, a certified financial planner at Freedom Financial & Business Planning in St. Petersburg, Florida.
Nursing homes check credit, too, says Doug Bellfy, a certified financial planner at Synergy Financial Planning in Windsor, Connecticut.
If your spouse moves into an assisted living facility or nursing home, and you want to rent an apartment nearby, you will want good credit for that as well.
“A high credit score can be a helpful mark on their rental application,” Bellfy tells Money Talks News.