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How your credit score can affect your retirement

Make sure your credit score doesn't drop with these five helpful tips.

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Kyle Morgan
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An increasing number of Americans are planning to work past the age of 65, highlighting the need for financial security during your retirement years. According to a survey taken by the Employee Benefit Research Institute (EBRI), 79% of American workers intend to supplement their retirement income by working for a salary.

In the here and now, it’s not uncommon for Americans to take out personal loans and credit cards to supplement their cash flow. If this sounds like a financial strategy you’re planning on using in your golden years, you’ll need to monitor and maintain your credit score.

Why your credit score is important during retirement

Just like working hard to save before you retire, a good credit score can help support you during your retirement years. Here’s how:

  • To be eligible for credit cards and different types of loans. If you’re a retiree, you may still like the convenience of a credit card to help pay for unexpected purchases. Similarly, a lump-sum personal loan or line of credit loan may also suit your retirement lifestyle. It’s important to compare your options before you apply.
  • Finding a new house or apartment. Maybe you’re ready to downsize or you’re planning on moving to an independent living facility. Creditors, landlords and senior living communities typically run a background check to look into your credit report and score.
  • Refinancing your house. During retirement, it’s wise to consider refinancing your home if you’re still paying off your mortgage. By refinancing, you can use the money saved on your monthly payments elsewhere in your retired years.
  • Applying for a home equity line of credit. Perhaps you need to make changes in your home to make it more accessible for you or your loved one in your older age. A good credit score can land you lower interest rates when refinancing to make home improvements.
  • Getting lower insurance rates. Higher credit scores tend to correlate with lower insurance premiums in states other than Massachusetts, Hawaii and California. Customers with healthy credit scores are seen as less of a financial risk by car insurance providers who use credit-based insurance scores.
  • Help support children by cosigning. Helping children get onto the property ladder or supporting them financially in later years has become more common. Whether you’re cosigning a loan or credit card, your credit score will be factored in when giving your loved ones a financial push.
  • Investing in property. If you pay off the mortgage for your primary residence before you retire, using the equity to invest in a property during retirement can provide additional income. However, you’ll need a good credit score to even consider this strategy.
  • Emergencies. Fixing up the house, minor car repairs and medical issues are expenses that can pop up unexpectedly. A healthy credit score can get you access to a higher credit limit which can help alleviate these types of unanticipated costs.

By keeping a clean credit score you can make sure you’ll be able to access finance during retirement should you need it.

5 ways to keep a healthy credit score during retirement

Use these helpful credit and financial strategies in your later years to keep that credit score strong.

  1. Budget for your income and expenses. If you don’t know where to start, a financial adviser can help you set up a working budget so you can handle your day-to-day expenses while paying down your debts during retirement.
  2. Reduce monthly expenses. Examine how much your spending for insurance, telephone, cable and other monthly expenses and see where you can cut back. To take it a step further, consider if the size of your home makes sense as you’ve gotten older, or if you really need two cars between you and your spouse anymore.
  3. Earn extra income. You may find that you have some extra time on your hands, why not turn those wasted minutes into supplemental cash with a job that isn’t physically demanding. Extra funds can help balance out your budget and give you more financial freedom.
  4. Monitor your credit report annually. Be in the know of what’s going on with your credit by checking each of your credit reports from all three credit major bureaus. Keep an eye peeled for errors or suspicious activity and reach out to the credit reporting agencies to fix any inaccuracies.
  5. Use your credit responsibly. Pay your bills when they’re due, keep your accounts open and active, maintain a low credit utilization ratio ask for credit limit increases every few years.

Why you should keep your credit accounts active

As people get older, they may find themselves more financially stable and using their credit cards less and less. Even if you’ve gotten to a point where it’s no longer necessary, swiping your card every once in a while can keep your account active.

When lenders see that an account is inactive, they’ll generally lower your credit limit, which can make your credit score take a small hit. Most people tend to close accounts they’re not using — don’t. When you close old accounts, you can damage your score by lowering the length of your credit history.

Check your credit score

Data updated regularly
Name Product Starting price Trial period Credit scores Credit monitoring Credit reports Update frequency
Experian Credit Report
Experian Credit Report
$19.99
7 days
TransUnion, Equifax, Experian
Yes
TransUnion, Equifax, Experian
Monthly, Annually
Get your credit report and FICO score for just $1 with enrollment in Experian CreditWorks credit monitoring. Cancel anytime.
Go to site
More Info
TransUnion Credit Report
TransUnion Credit Report
$24.95
No
TransUnion, Equifax, Experian
Yes
TransUnion, Equifax, Experian
Monthly
TransUnion credit score, monitoring and identity theft insurance.
Go to site
More Info
myFICO
myFICO
$19.95
No
TransUnion, Equifax, Experian
Yes
TransUnion, Equifax, Experian
Monthly
Get quarterly access to your most widely used FICO® Scores and a 3-bureau credit report.
More Info
Equifax Small Business Credit Reporting
Equifax Small Business Credit Reporting
$99.95
No
TransUnion, Equifax, Experian
Yes
TransUnion, Equifax, Experian
Annually
Monitor your key business relationships to protect your company from losses.
More Info
GoFreeCredit.com
GoFreeCredit.com
$24.95
7 days
TransUnion
Yes
TransUnion
Monthly
$1 for a seven-day trial to get access to your credit score and credit report from TransUnion.
More Info
Credit Karma
Credit Karma
$0
No
TransUnion, Equifax
Yes
TransUnion, Equifax
More Info
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Compare up to 4 providers

Data updated regularly
Name Product Monthly Fee BBB Rating Customer Support Cancel Anytime
Self Credit Builder Account
Self Credit Builder Account
$25
B
Phone, Email, Online Chat
Yes
Go to site
More Info
Save money and build credit with a secured-installment loan that you can access after 12 or 24 months.
CreditRepair.com
CreditRepair.com
$69.95
D
Phone, Email, Mail
Yes
Go to site
More Info
Specializes in clearing your credit report of inaccurate items with all three credit bureaus.
Lexington Law Credit Repair
Lexington Law Credit Repair
$89.95
C
Phone, Email
Yes
Go to site
More Info
Law firm that offers three tiers of credit repair suited to your situation.
Credit Firm Professional Credit Repair
Credit Firm Professional Credit Repair
$49.99
C+
Phone, Email, Mail
Yes
Go to site
Professional credit repair service that can help you create a step by step action plan. Cancel anytime.
The Credit People
The Credit People
$79
C+
Phone, Email, Mail
Yes
Go to site
More Info
Professionals work with you to clean up your credit and raise your credit scores. Cancel anytime.
Sky Blue Credit
Sky Blue Credit
$79
C
Phone, Email, Mail
Yes
More Info
Free credit report and monitoring that comes with a 90-day money-back guarantee.
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Compare up to 4 providers

Bottom line

Even when you retire, your credit score still matters. By managing your finances and keeping a high credit score, you don’t have to stress about the “what ifs” during your golden years.

So by maintaining a healthy credit profile, when it’s your time to relax and enjoy retirement, you can do just that.

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