Why Maintaining a Good Credit Score in Retirement is Important
You are retired, and the living is easy. While you were always conscientious about maintaining a solid credit history and a good credit score while you were working, you might think this isn't important in retirement. Nothing could be further from the truth.
There are a number of reasons that maintaining good credit is important even in retirement.
Qualifying for a mortgage
The ability to qualify for the best possible mortgage rates and terms is important in retirement. You may need a mortgage to buy a home or to refinance a current mortgage. This could be a second home in a location that you'd like to spend time in during retirement. It could also be connected to a move to a new location in retirement.
While the conventional wisdom is to be mortgage-free in retirement, a good credit score provides you with the financial flexibility to invest your money elsewhere and take advantage of low mortgage rates if you qualify.
Qualifying for the lowest auto insurance rates
Insurance companies use information from your credit report as part of their calculation to decide whether to accept you as a customer. This information can also factor into the calculation of the premium you will pay.
Studies have shown a correlation between credit scores and the likelihood that you will file an insurance claim.
Better rates on auto loans
During retirement, its highly likely you will need to purchase a car at some point. Maintaining a good credit score allows the flexibility to obtain an auto loan should you desire at a favorable rate. This provides you with the flexibility to finance the purchase if the loan rate is attractive or pay cash if you desire.
Having a credit card is just more convenient sometimes. For example, it's virtually a must when renting a car. A credit card is convenient when traveling in general as well as for everyday expenses. For those who spend within their means, a credit card is an easy way to keep a record of your spending and make a single monthly payment for what you've spent.
In order to obtain or retain access to credit cards that offer favorable rates and perhaps certain perks, maintaining a good credit score into retirement is a must.
Those with good credit scores can often get access to credit cards that offer rewards for everyday purchases. These rewards can take the form of cash-back, travel rewards and other perks. Retirees still buy things and keeping your credit score high can allow you to access cards offering these reward perks.
Covering emergency expenses
While having a cash emergency fund is preferable for retirees, good credit allows you the flexibility to cover emergency expenses via a credit card or perhaps even a personal loan.
Emergency expenses can also include helping family members.
Your encore career
For many retirees, this is the time to pursue their passion. For some, this might mean starting or purchasing a business. Either of these options will likely require start-up capital. You might be able to fund the costs from your own resources. Even if this is the case, you will need to decide if this is the best use of this money. Do you want to take a significant portion of your 401(k) or other retirement savings and tie it up in a business?
Having a good credit score gives you the flexibility to look at the best options to fund your business venture and to do what's best for your financial situation. It also gives you options as the business grows.
Maintaining a strong credit score should be a life-long goal. With longer life expectancies and many retirees in better health than prior generations, retirement can last nearly as long as your working career. Many financial experts advise retirees to reduce or eliminate debt as they head into retirement, and this is solid advice.
The responsible use of credit during retirement can offer retirees a high degree of flexibility and choice in terms how to pay for things. It is vital to maintain a good credit score in retirement in order to have these options.
All content and photo provided in this blog is supplied by Roger Wohler and is for informational purposes only. Barclaycard makes no representations as to the accuracy or completeness of any information contained in the blog or found by following any link within this blog.
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