Many seniors probably don’t consider building and maintaining credit to be a top financial issue. After all, the home and car are paid off, and everything else is contained within a careful budget, right?
Not exactly. While that might have been the norm for retirees in the past, it is changing now.
In fact, during the period between 2003 and 2015, per capita debt at age 65 grew by 48%, with big increases in mortgage, auto loan and student loan debt, according to a report published by the Federal Reserve Bank of New York.
Since today’s seniors borrow more, keeping a good credit score is paramount. Following are a few golden rules for maintaining good credit in your golden years.
Have at least one credit card
Seniors managing well on Social Security and their retirement savings might be tempted to go cash-only. But that can be a bad idea, warns credit expert Curtis Arnold.
“If they stop using credit cold turkey, their credit score is likely to be adversely affected,” says Arnold, founder of CardRatings.com.
The trick is to use that credit card, but pay off the full balance each month. That way, you’re charging only what you can actually afford, and you won’t accumulate a larger balance from month to month, which can be detrimental to your credit score.
Beverly Harzog, a consumer advocate and the credit card expert for U.S. News & World Report, regularly hears from divorced or widowed senior women whose husbands handled the finances. Spouses who never signed for loans and never had credit cards in their names can be invisible to the big three credit bureaus. That means they might not have access to loans.
“You don’t build credit as a married couple. Everyone should have a credit card in their own name to build credit themselves,” says Harzog, author of “Confessions of a Credit Card Junkie: Everything You Need to Know to Avoid the Mistakes I Made.”
Sometimes your status as an “authorized user” on a spouse’s card does get reported to the credit bureaus. Find out for sure by requesting a free copy of your credit report.
If you don’t have credit in your own name, apply for a card right away. Just make sure to choose a card that reports to the three main credit bureaus — Experian, TransUnion and Equifax. You can visit the Money Talks News Solutions Center to find the right credit card for you.
Separate your credit accounts if you are divorcing
What if both partners have decent credit scores when they decide to part ways later in life? Personal finance expert Liz Weston notes that “gray divorce” is becoming more common. In such cases, it’s essential to split credit accounts when you split with a spouse.
One of Weston’s readers checked his credit score and found that his soon-to-be-ex-wife had stopped paying on a joint account. He immediately paid it off, but the damage to his credit score was done.
“It’s so important to separate financial accounts when you’re separating from a spouse,” Weston says.
Guard your cards
Does a cleaning service or personal care attendant drop by your home regularly? Make sure you lock your credit cards away in a file cabinet or other safe place.
Also, do not leave a wallet or purse lying around in plain view. And don’t let a handyman roam around the house unattended.
Refuse to co-sign
Do not put your finances at risk by co-signing a loan or other form of borrowing. Perhaps it’s true that your grandson is having a hard time building credit as an unemployed 22-year-old. But he needs to figure things out for himself. In other words, welcome to adulthood, where things don’t always go the way you’d hoped.
Be vigilant for ID theft
Identity theft can happen to anyone at any age, but we are particularly vulnerable to scams of all types as we age. So, monitor your credit report for accuracy, lest scammers wreck your good name — and your credit score.
If you find a problem, the “Identity Theft” page on the Federal Trade Commission website offers step-by-step instructions on how to fix things. Also, check out “Free App Helps You Avoid — or Recover From — Identity Theft.”
Don’t overdo it
Spending almost to a card’s limit is a bad idea, even if you do pay it off each month. That’s because credit bureaus may see only the balance on the day it’s reported, as opposed to a zero balance month after month. Keep charges below 30% of your credit limit at any given time.
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