Friday, June 14, 2013

How Important is Your Credit Score After 50?

We've all heard that a credit score can be “built over a lifetime and destroyed overnight.” But once you reach 50 and your long-term financial goals are mostly in order – let's say you have a mortgage, a 401k or an IRA, and a healthy emergency fund – how important does your credit score become?

The answer is that while your credit may not seem as important as it did when you were shopping around for your first mortgage years ago, life's full of surprises and you never know when a good credit score may be necessary after 50. 

Here's a few reasons why it's simply a good idea to maintain a solid credit score after you reach the age of 50...

Unforeseen Financial Emergencies


As most Americans are now aware of in the post-Great Recession era, the bottom can fall out on the economy seemingly overnight. It's safe to say that most of us now have our guard up when it comes to the prospect of a financial emergency, which means preparing for the worst and hoping for the best.

With that in mind, a healthy credit score well into your 50's is a valuable asset for you and your family. Mortgage refinancing, credit advances and loans are all relevant to 50-something consumers, but are hard to get done at any age with a bad credit score.

Basically, it's better to be safe than sorry when it comes to credit.

Existing Debt


50-somethings with existing debt can negotiate better interest rates if their score and credit history is still considered good-to-excellent. This is important to both the individual and their heirs in case they pass away, since assets after a person has passed are distributed to beneficiaries only after their debt has been paid off. If the debt outweighs the estate, beneficiaries aren't saddled with the old debt (unless they're a co-signer on any of these outstanding debts), but they do miss out on an inheritance.

This is all to say that an old debt never dies, but unfortunately we do. (Mordbid, I know.) And to prepare for such a situation is to take action while we still have the income, the assets and – most importantly – the time.

Paying down old debt – especially credit card debt – can take a lot of that precious commodity that we call “time”. One way to expedite this process is by negotiating lower rates with your credit card companies; another is to transfer a sizable portion of that debt to a 0 percent credit card applied to balance transfers. Simply apply for a new, 0 percent card, transfer as much of your existing debt to your new card as you see fit, and start paying it down more vigorously to remove as much of that balance as you can during the allotted 0 percent period.

While both of these options allow someone to pay down their debt at a faster rate, they're essentially reserved for good-to-excellent credit consumers. If you want lower rates, you need a good score, which is why it makes sense to maintain a healthy score well into your 50's and beyond.

The Hassle, and The Guilt


The last reason it's important to maintain solid credit and good-standing accounts is the hassle and the guilt that comes with defaulting and paying late, which are what ultimately drive down your credit scores for good.

The incessant phone calls – which you're legally entitled to stop, by the way, as part of the Fair Debt Collection Practices Act – the scary looking letters (you can stop these, too), and let's face it, the hit to your pride. None of that's worth dealing with at any age, especially when you thought your financial woes were long in your rear view mirror.

Look, it doesn't feel “good” to have bad credit and it certainly doesn't feel good to owe money. Maintaining a good credit score is what you've done all your life, so why let go just because you're unsure of it's worth in 50's and beyond?

No one can tell the future, and it's impossible to say when or how a good credit score could come in handy down the road. But it's best to be prepared if the situation arises; you'll sleep better at night in the meantime knowing you – and your family – will be in good shape in case of a credit or finance-related emergency thanks to your lifelong dedication to paying on time and carrying little to no debt.

This post was written by Jason Bushey. Jason is a personal finance expert and you can find his work daily on www.creditnet.com.


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