Think Your Credit Score Doesn’t Matter in Retirement? Think Again.

credit score

You have battled with your credit score your whole life. You wanted a good score so that you can could get the best loans, especially for your home mortgage. Finally, you’ve reached retirement, and you have it in mind that you can rest easy. You have your mortgage, you are done taking out loans for education, so you don’t have to think about your credit score any more right? Wrong. Your credit score still maters in retirement.

You Need to Watch Your Money Carefully in Retirement

Unless you happen to retire with extreme wealth at your disposal, you need to be frugal after retirement. You need to budget. After all, you don’t have the kind of income coming in that you once did. You aren’t going to get raises and other windfalls. You have to make do with what you have.

Therefore, it’s really important that you watch your money carefully. If you have bad credit, then you put yourself at risk. What if something happens and you need to refinance your home? Or what if you need to take out an emergency loan? So many things can go awry in life. Medical expenses, natural disasters, the needs of adult children … you just might need to get credit or a loan again even after you’ve retired.

If you don’t have good credit, then you’re going to end up with a loan that has terrible terms (if you can get a loan at all). A bad credit score means you’ll have a higher interest rate, which in turns means that you’ll have higher monthly repayment bills. If you’re trying to budget in retirement then you can’t afford to waste money on those exorbitant fees. If you maintain a good credit score in retirement then you don’t have to worry about that so much.

You Probably Have More Bills in Retirement Than You Anticipated

People like to paint a rosy picture of retirement. You’ve worked hard your entire life, so now you can rest. You can take the money that you set aside and enjoy your sunset years. However, this financially lovely picture simply isn’t the reality for many Americans reaching retirement age today.

Baby boomers who have retired or about to retire have much higher bills than they might have expected. In fact, many still owe on their homes, either due to an original mortgage or to refinancing over the years. Additionally, older people increasingly have high levels of credit card debt to their names. Some people even still have student loan debt when they retire!

If you have these types of outstanding debt, then you really need to make sure that you have a good credit score in retirement. You should work to improve the score as much as possible. You can do that through debt repayment, increased credit lines, disputing incorrect credit report information, etc. Once you have boosted your score as much as possible, you can then use that good credit score to get a great rate on a consolidation loan. This will allow you to repay that debt as quickly as possible so that it doesn’t hang over you throughout your entire retirement.

Plus more and more Americans retire but then start a post-retirement business of their own. If you’d like to start a new business, then you might need a business loan. If you have a good credit score in retirement, it’ll be significantly easier to get that loan.

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7 Easy Ways to Fix Your Credit

easy ways to fix your credit

If you have the day off today it’s the perfect time to spend it improving your personal finances, and it all starts with your credit.

Analyzing our financial situations can be a daunting task, especially if a bad credit score haunts you. But, despite how easy it is to fall victim to credit, it doesn’t have to be the enemy we often make it out to be. If the words “charge it” made a regular appearance in your everyday vocabulary without a plan of action, you may be in need of some personal credit repair. Although the damage may seem irreversible, there are easy ways to fix your credit. Below, I’ve listed just a few:

Easy Ways to Fix Your Credit

Don’t Transfer Your Credit

It may be tempting to simply transfer your credit from one card to another, but avoid this as much as possible. All you are doing is causing yourself more heartache and (and debt) instead of taking action on your existing due payments. Along with putting off the inevitable, you may be subject to transfer fees and are therefore increasing your costs.

Keep Cards Without Annual Fees Open

As counterintuitive as it sounds, don’t close all your accounts at once. Instead, keep the ones that do not charge you annual fees to use for small purchases. The key is to make sure you then pay off those balances right away to avoid late fees, increased interest, and so on. This action alone is one small step you can take in improving your credit. Plus, canceling your cards without taking the proper steps (or that still have a balance) can end up hurting you more. CreditCards.com provides these helpful tips on how to cancel a credit card.

Seek Help Online

The internet is full of resources just waiting to help you with all your financial woes. In addition to this blog, you can find companies online dedicated to helping you repair your credit, such as Credit Sesame, which is a free web-based tool that provides you with not only a free credit score but advice on how to improve it as well. Not to mention, there are plenty of online financial forums you can participate in as well, like this one.

Review the Statute of Limitations on Your Debt

Your debt does have a statute of limitations, which essentially means the length of time that passes where a creditor can sue you for the outstanding payment. This length of time varies from state to state. If the statute of limitations on your debt has run out, you’ll be able to negotiate a lower overall sum. In some cases, the collector may end up ceasing efforts to collect the money owed.

Look Into a Secured Credit Card

CreditKarma.com advises individuals looking to rebuild (or building credit history in general) to consider a secured credit card. Secured credit cards, they explain, typically require that you pay a security deposit to work as collateral in the event you may have a past due payment on your account. Because you are taking on the financial risk with this deposit, they are not only easier to obtain approval by lenders but also help you improve your credit.

Avoid Filing for Bankruptcy

Filing for bankruptcy should be an absolute last resort. Try to avoid taking this step as much as you can as this stays on your credit record for roughly seven to ten years. It may wipe out your credit card debt, but it will not improve your credit report. In some cases, it may actually make it worse and will make it harder to obtain a loan or credit cards in the future.

Pay Your Credit Card Bills Early

Make an effort to pay your credit card bills before the statement due date. By paying your bill before your next statement is even ready, you can help to increase your credit score. This is really one of the easiest ways to fix your overall credit.

The important thing to remember is that you are not alone in this process. It does also seem to be easier to improve your credit as you get older, given that time helps to build a credit history, as shown in this December 8, 2016, article on CreditCards.com by Jamie Gonzalez-Garcia. The process is not easy (or fun), but with due diligence and discipline, you can conquer your credit and look forward to reaping the benefits of your hard work.

The above methods are just a few of the easy ways to fix your credit. What would you add to the list? 

What is the Starting Credit Score?

starting credit score

A common misconception comes with turning 18: You can automatically start borrowing money on your own. Wrong. While you are targeted by credit card issuers all wanting to take advantage of your newly found adulthood, you are unable to take out a loan. At least, not without a cosigner. Why is this? The answer is fairly straightforward, really. It’s all thanks to a lack of credit and data. So, what is the starting credit score?

The Starting Credit Score

Credit does not automatically appear on our records; we have to put it there. Until we put borrowing data on our records, we have no credit, credit reporting company Experian explains. Thus, the starting credit score when entering adulthood is non-existent. This is not the same, though, as having a zero or bad credit score. It essentially means there is no record or data on which to base your repayment capabilities. Credit.com goes on to explain that your score does not event start at 0. For most companies, the scoring range goes from 300 to 850, with 300 being the worst or lowest.

So, if we start with no credit, how can we build it up?

How to Build Your Credit Score

There are a few ways to grow and develop your credit score. As annoying as the multiple direct mailers from credit card companies may be, credit cards can be a great tool to build that score. But, don’t just pick any credit card. Make sure to research interest rates (especially on retail credit cards), terms and conditions, and more before signing off on that plastic. When starting from scratch, a secure credit card may be the best option for you. Many carriers like Visa and Mastercard do have secured options. Likewise, if you’re in college, look into student credit card choices. You just need to shop around for the perfect one for you and your situation.

Another way to take your score from nothing to something would be a credit-builder loan, which are smaller loans that do exactly what it sounds like: build your credit. You can also have someone co-sign with you on a loan. Once you start making repayments on the loan, you will start developing that “data” discussed previously in this article. It will take about six months of consistent and positive reimbursements for your numbers to start to appear on reports.

Tips on Keeping Your Credit Score Positive

Once you build your credit, you need to then continuously and simultaneously make an effort to keep it positive. Having a higher rating will provide you with more opportunities to request borrowed money when necessary (like when buying a home), unlike the situation when you have a starting credit score. Here are few quick tips on keeping your rank in the green:

  • Automate your payments. Arrange for your credit card(s) to take a fixed amount from your bank account each month to go toward your balances. This not only prevents a missed payment, it helps to show companies you are financially capable and responsible, which will boost your credit rating.
  • Monitor your credit report. Request your credit report regularly to keep yourself aware of your report and changes that may have recently occurred. If you notice it is not where you would like it to be, you can start making a conscious effort to improve it.
  • Pay your bills on time. Avoid making late payments not just on your card balance but your household bills as well. If you get behind on your electric bill, the utility company can file a claim against you, which would hurt your score. This may seem like a no-brainer, but this is a common cause for poor credit.
  • Talk to the companies. We all go through hard times, and sometimes, our finances can be unforgiving. However, most people don’t realize that by simply informing bill collectors of your circumstance, you may be able to lower your payment amounts temporarily until your situation improves. This helps to lessen the blow to your credit score while you work on getting back on your feet.

Even though the starting credit score is non-existent, it is far from impossible to grow it. Everyone builds theirs at a different pace. As long as you still make wise decisions, stick with a budget, and remember that borrowed money needs to be repaid in a timely manner, you will be well on your way to a higher credit rating.

What problems did you face when you first started signing up for loans, and how did you overcome them?