Written by Alayna Okerlund | Last Updated February 24th, 2020Alayna Okerlund is a finance-focused Senior Content Strategist at BestCompany.com. Over the past three years, Alayna's finance-related research has helped readers feel more financially confident. She has worked with several reputable experts and has provided content for a variety of well-known publications like Forbes, Reader’s Digest, Lifehacker, and more.
This is part one of our two-part credit retirement series. Read part two here.
Odds are, you won’t have too much to worry about after you retire.
Retirement allows you to trade in your work deadlines and heavy-traffic commutes for sun-soaked vacations and new hobbies. It’s something you’ve likely been dreaming about since you started your professional career.
And, in general, retirement is the ultimate goal that allows you to truly enjoy your golden years.
Although retirement can be full of sunshine and daisies, it doesn’t mean you can leave behind all of your responsibilities, especially your credit.
And we get it. No one really wants to worry about finances or credit when they retire, but it’s important to keep in mind that your credit doesn’t retire when you do.
In fact, as long as you are living, your credit score will continue to be affected by your life choices. So, if you make bad financial decisions during retirement, your credit will likely suffer.
Now, you’re probably wondering why you should even care if your credit score drops because you’re past your loan-borrowing days. And that’s a legitimate thought.
When you were younger, you most likely focused on building and maintaining a good credit score so you could get good auto loans, a decent mortgage rate, good financial opportunities, etc. Credit may seem irrelevant to you now that you’re retired.
The reality is, however, that even if you aren’t planning on taking out a loan or financing anything in the future, your credit is still important. And retirement doesn’t make you invincible from facing the negative consequences that come with having a bad credit score.
In this article series, we will discuss a few reasons why you should continue to actively manage your credit and what you need to do to make sure you have a good credit score throughout retirement.
Now, let’s dive into part one.
Why your credit still matters
You may age like fine wine, but your credit might not, especially if you decide to throw it on the back burner when you retire.
We asked a few experts why they think credit still matters after an individual reaches retirement.
Here’s what they had to say:
Randall Yates, Founder and CEO of The Lenders Network
“Maintaining good credit in retirement is important because your credit affects more than just the interest rate you get on loans and credit cards.
For instance, insurance companies often check credit to help determine your insurance rates. Cell phone companies also check credit before offering phone service.
Even if you don't plan on using your credit in the future, it's always a good idea to maintain credit in the event of an emergency, or if you want to cosign on a loan for a grandchild.”
Jacob Dayan, CEO and Co-founder of Finance Pal and Community Tax
“It is important to maintain a good credit score following retirement as it influences your ability to refinance mortgages if your rates drop, get credit card approvals, obtain lower insurance premiums, and get auto loan approvals.
This can affect hobbies and activities you might wish to pursue during retirement, so it’s always a good idea to keep them in good shape even to be safe.”
Freddie Huynh, Vice President of Credit Risk Analytics with Freedom Financial Network
“Once they reach their fifties and sixties, some people think that they won’t be borrowing money again, so there’s little need to worry about credit profiles and scores. This can be particularly so if they own their homes. But credit scores have a major impact on the ability to borrow any money — and the interest rate on the loan.
Maybe the need for a personal or business loan will arise, or the need (or desire) to buy a different — perhaps smaller home.
Credit profiles and credit scores can affect the ability to rent an apartment or lease a car. Many auto insurance companies also take credit into play when setting rates.
(Additionally,) many people who have retired find that they want to, or have to, return to work, whether it’s full-time or part-time. Employers today can and do check credit reports.”
Sean Messier, Credit Industry Analyst at Credit Card Insider
“There are plenty of benefits to maintaining great credit scores after retirement.
Though retirement may be the end of your full-time working career, you still have years upon years left to enjoy. That can often involve buying things, like vehicles or homes, that you would rather not purchase in full.
Taking meticulous care of your credit scores during retirement can help ensure you’re still able to secure the best possible interest rates and offers when it comes to loans and credit cards, which you may very well use on a regular basis.
Credit cards are great for earning cashback or rewards on staple purchases, like gas and groceries, that you likely buy on a regular basis whether you’re working or not.
If you’re ever looking to get a different credit card that earns rewards and provides benefits that complement your post-retirement lifestyle, you’re going to want great credit scores, as this helps keep your approval odds high.
Adiel Gorel, CEO of International Capital Group (ICG)
“Just because someone retired, doesn’t mean they don’t need good credit. They may still wish to buy a car, an appliance, or any other purchase that will be better financed with good credit.
In fact, I would argue that it is even MORE important for a retiree to maintain good credit since traditionally, retirees try to spend as little as possible. Good credit will enable them to pay less when purchasing anything on credit.”
Dan Gallagher, Personal Finance Expert at ScoreSense
“While a well-thought-out cash reserve and a disciplined budget is a better practice for seniors (everyone) than using credit, there are reasons why retirees should maintain good credit. Among these are possible needs for credit and credit-score affected services.
A retiree may need emergency credit to help an adult child or to maintain a business in retirement.
One might need to rent a home or even a car, or live where there are ongoing obligations such as Homeowners Association dues and assessments; even cable/internet and club/golf agreements can be affected by poor credit scores.
Some post-retirement employment situations can require strong or at least above-average credit scores, which can plummet if credit accounts are paid off and closed.
One might benefit from incentives given with store cards as well. So, credit scores and availability are important.”
Richard Best, Personal Finance Expert and Writer at dontpayfull.com
“With your mortgage paid off and your retirement account flush, you may think you can leave your credit score behind. You should think again.
While you may not have any foreseeable borrowing needs to speak of, there are good reasons why it would be important to maintain a good credit score in retirement.
Keeping your insurance costs down — your homeowners and auto insurance carriers use credit scores in determining your premium rates. If you have a good credit score, you are deemed to be more responsible, and, therefore, a better risk.
Even in retirement, you should compare insurance rates periodically to see if you can save money. With a high credit score, you will have more options available to you and more leverage to negotiate rates.
Refinancing your mortgage — an increasing number of retirees are carrying a mortgage into retirement. If you happen to be one of them, you may want to keep your options open for refinancing your mortgage.
A good credit score would allow you to more easily refinance if mortgage rates should drop. Or, in the unlikely event your financial circumstances should worsen, you could access your equity through a cash-out refinance.
Moving or downsizing your home — It may dawn on you after you are in retirement that you may want to move to a different location (closer to the kids), or you decide you want to downsize for simpler and more affordable living.
If your move entails leasing a place temporarily or permanently, you will need a good credit score to get the approval of the property owner. If the move requires any financing or refinancing, your credit score will dictate the terms of the loan.
Paying for emergency expenses — if you have planned well for retirement, you should have at least six months’ worth of living expenses set aside as a cash reserve for emergencies. But, if you don’t, or if you should run through your cash reserve, you would need to borrow money to pay for unexpected events such as a major car or home repair, or a major medical expense.
You need to keep your credit score up to ensure your credit card issuers will approve a sufficient credit limit.”
The bottom line
As you’ve read above, credit is clearly an important part of life, even after retirement.
Maybe you want to downsize and buy a new home that’s closer to your grandkids or maybe you want to get that snazzy car you’ve always wanted and take your spouse on a road trip adventure.
Regardless of what you want to do after you hang up your office clothes for good, there are a few things you need to keep tabs on in order to maintain a good credit score in retirement.
Make sure to check out part two of this article series to find out what the experts say you should be doing to keep your credit score up while you enjoy your work-free years.