Much of the conversation surrounding credit scores focuses on younger people looking to rent or buy property. But, your credit score is important at any age. For many older and retired adults, your credit score might not have been important to you at any stage of your life. The FICO credit score was created in 1989, so homeowners who bought a house before that and never moved probably haven’t paid much attention to theirs. Below, we will discuss why older adults should pay attention to their credit score, and how to improve it.
What is a Credit Score?
Your credit score is a predictor of your credit behavior and how likely you are to pay back loans or credit, according to the Consumer Financial Protection Bureau. The score generally ranges between 300 (really bad) and 850 (great). Generally, you want your credit score to be above 600. Anything below may be seen as more of a risk. Several factors affect your score. They may include bill-paying history, existing debt, how many loan accounts you have, the types of loans you owe, the length of time your loan accounts have been open, credit card usage, how much available credit you have, foreclosures, and bankruptcies.
Why Credit Scores Matter for Retirees
Usually, having a higher score makes it easier for you to qualify for a loan. A better score can also result in a better interest rate or loan terms. This can be vital if you need to move, downsize, or buy another property. If you need to apply for loans to cover healthcare costs or borrow money for treatment, you want a better score. A poor credit score can even affect your ability to get a good cellphone plan. As most retirees live on fixed incomes, it can be important to maintain a strong credit score.
What Makes Up Your FICO Credit Score?
There are 5 main factors to your FICO Credit score. While it may be impossible for you to calculate it yourself, knowing the breakdown can help you focus on key areas to improve. The largest chunk of the calculation comes from your payment history. It accounts for 35% of your score. Making payments promptly and not letting them go over due dates can be important to maintaining a healthy score. Next, at 30% is the amount owed. While having some money owed is good, too much can be a hindrance.
The next 15% is made up by your length of credit history. If you have a long-standing mortgage, a history of loans, or long-time credit cards, this aspect is likely strong. The next 10% is determined by new credit. Using your credit cards regularly, in a financially safe way, can help contribute to this section. Finally, the last 10% is your credit mix. This refers to the variety of credit accounts you have. Loans, credit cards, property mortgages, etc.
Paying Down Your Credit Card Balances
Large credit balances can hang over your credit score and negatively affect it. If you can pay more than your minimum monthly payment, do so. This can help reduce the growing interest and improve your credit. Generally, you should keep your credit utilization at less than 30% of your limit.
Automatic Bill Payments
Automatic payments can be vital to improving your credit score. They can help improve the payment history section of your score. Because that accounts for 35% of your overall score, this can be an integral step to make. If you have the money in your account to safely make auto-payments, do so.
Raise Your Credit Limit
When you apply for a credit card, you are given a credit limit. You can contact your provider to raise your credit limit after you have used the card for some time. If you are disciplined in how you use the card, they will likely raise it. This can be beneficial for the strength of your credit.
Check Your Credit History For Errors
It is important to do this regularly. About 44 percent of Americans found at least 1 error when checking their credit reports. Errors in reporting can happen, but regular monitoring can also help you identify scams, identity theft, and other potential red flags. Acting quickly can help reduce the damage to your credit score that can occur as a result of scams.
Clearing Negative Hits to Your Credit Score
If you had a few late payments or lapses over the years, they can still weigh on your credit score. You can try contacting your lender to remove these negative reports with an appeal. If you are usually a good account, they will work with you to remove the blemishes on your record.
Retirees Should Make Sure Their Credit is in Good Standing
Overall, your credit score can affect your ability to make important lifestyle changes when needed. From changes in living situations to healthcare and assistance at home. Being able to afford care or downsizing is important, but a good credit score can make a difference in loan servicing and interest rates if you need to borrow money. Because retirees are usually set to a fixed budget, making sure that you have a good credit score can be vital to protecting your lifestyle should unexpected circumstances arise.
Safe Harbor Healthcare Services does not provide medical, healthcare, or financial advice via articles. This material has been prepared for informational purposes only. It is not intended to provide, and should not be relied on for advice.
Safe Harbor Healthcare Services has provided excellent home care on Staten Island since 1967. Our services help older and disabled individuals live safely and independently; while giving their families the peace of mind they need. For more information contact us or call (718)-979-6900.
