Credit is Money

Spoiler Alert: You still need good credit, even in retirement.

“Remember that credit is money.” Benjamin Franklin.

The third Thursday in October is “Get Smart About Credit Day.” Yes, there is such a thing. Also, yes, it’s needed. While the national day focuses on responsible credit habits for young people, older Americans shouldn’t ignore promoted practices. Even during retirement, good credit is still salient.

You might think that your hard work towards good credit habits has paid off once you head into retirement. You may also feel your obligation to build responsible credit is fulfilled, but that is not entirely true; even if you are mortgage-free and don’t plan to apply for car loans or other credit, your credit score matters. At some point, you may want to downsize, move into a retirement community or eldercare facility. Often those changes will involve verification that you can afford and maintain monthly charges. While it may not seem like you need credit now, you know things can change by this point in your life.

Most people are aware that your borrowing habits and credit history are critical in determining both the ability to get a loan and the available interest rates. However, you might not naturally expect that your credit profile can be important in other ways. Your credit score can indicate other habits you have and can come into play for insurance premiums or get a part-time retirement job. A low credit score can lead to higher premiums or possibly being passed up for a job opportunity.

Money.com recently published an article “Does My Credit Score Matter in Retirement?”, according to the Vice President of the National Foundation for Credit Counseling, it is essential to maintain a good credit score later in life. He notes that your credit score is likely to be a factor, whether you’re 80 years old or 18 years old. The good news is that the best strategies for sustaining good credit are mostly the same across age groups and similar to the good habits you developed while building your credit. For decades things like making timely payments and keeping credit balances low have been important and still are. Continue to maintain those habits. Older Americans should also keep in mind your credit score awards your credit history’s length. Seniors should generally avoid closing long-standing accounts. It is also good practice to make occasional purchases with a credit card, especially if you have paid off all of your other debts. A lapse in credit activity can also hurt your score.

As unfortunate as it is, the need for monitoring your credit is a sign of the times and essential for maintaining a good score. Just as you would strive to protect yourself and your family, you need to protect your credit record too. Here are a few tips to consider.

Under the Fair Credit Reporting Act (FRCA), each of the three credit agencies must provide you with a free copy of your credit report once every 12 months. Just as you review your credit card statement for erroneous charges, you should check your credit report. It is a good practice to pull your information at least once per year. You should report any discrepancies immediately.

You can be a bit more proactive and consider a credit monitoring service. You can think of this as your security system; when the alarm system is triggered, it sounds out alerts. Several

companies offer this service, many of which charge a fee. If you are looking for a free option, consider CreditKarma.com. The only downside with Credit Karma is that it only monitors two of the three reporting agencies.

Are you looking for the most comprehensive protection? How about a credit freeze? While it is the most comprehensive, it also requires the most work on your behalf. The system works by placing a block on anyone accessing your credit report. For you to access your credit, you can temporarily permit financial institutions to process an application for checking & savings accounts, credit cards, lines of credit, or loans by providing a pin to unfreeze your credit. The $10 fee is waived if you are at least 65 years old or can show you have been a victim of identity theft. The inconvenience of a few extra steps is a small price to pay for the extra security freezing your credit provides.

As Benjamin Franklin said, “Remember that credit is money”, I will further that statement, even in retirement. Keep your good credit habits and monitor your credit; it’s worth something!

This material is provided as a courtesy and for educational purposes only.  Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation.