Retirees often don’t need to borrow money or pass credit checks anymore. By the time you retire, you could already have some quality credit cards, a home you’ve paid off, and enough in your retirement accounts to live comfortably.
Taking all that into consideration, your credit score might not seem too important. But it’s still wise to maintain a good credit score, because there are ways it could impact your life.
1. Your credit score could affect your insurance rates
Still planning to drive in retirement? If so, you’ll need auto insurance, which means your credit score is important. In most states, insurance companies can use credit scores when setting rates.
Drivers with high credit scores are considered a lower risk, so they pay less for insurance. It’s not a small difference, either. Drivers with excellent credit paid an average of $1,947 for auto insurance in 2023, while drivers with poor credit history paid $4,145, according to research by The Motley Fool Ascent.
Auto insurance rates already tend to rise for drivers 75 and older. If you neglect your credit score, it could make your premiums much more expensive. A high credit score, on the other hand, could help you get the best auto insurance rates.
This applies to more than just auto insurance. Your credit score can also affect your homeowners insurance premiums. If your credit score drops, you could end up paying much more to insure your home, too.
2. You might decide to apply for a credit card or loan later
Your credit score is one of the most important factors on credit card and loan applications. Even if you don’t need a new credit card or loan right now, you never know what the future holds.
For example, you could have medical bills you need to pay off over time. In that situation, your best option may be a low-interest personal loan or a credit card with a 0% intro APR. To qualify for either of those, you’ll likely need good credit.
Maybe your spending habits will change in retirement. You’re cooking at home more often, so you decide you want one of those cash back cards that earns more at grocery stores. If so, you’ll be happy that you didn’t let your credit score drop.
There are plenty of situations where it could be to your benefit to get a credit card or loan. By maintaining your credit score, you’ll keep that option open, just in case you need it.
3. You could move and need to rent or buy a new home
The idea of a forever home is nice, but life doesn’t always work out that way. It’s not uncommon for retirees to move once or more. I’ve personally seen a few retired family members move multiple times.
Let’s say you decide to buy a home closer to family. Mortgage lenders aren’t legally allowed to make lending decisions based on your age. If you have a stable source of income and meet credit score requirements, you could get a mortgage. Having a high credit score will help you qualify for the lowest mortgage rates.
Some retirees sell their homes and downsize by renting an apartment. If you go this route, most landlords run a credit check on rental applicants. Your credit score could make the difference in getting approved for the place you want.
It doesn’t hurt to maintain your credit score in retirement, but neglecting your credit score could come back to bite you. Keep paying your bills on time, don’t take on too much debt, and check your credit score every three to six months. That’s all it takes to maintain your credit and avoid potentially costly issues.
