Friday, March 11, 2011

Why Good Credit Still Matters in Retirement

You may think you are sitting pretty with a nice retirement fund and not much time left before punching the clock for the last time. With your home paid for and your other financial affairs seemingly in order, it may seem like the only thing to do is sit back and enjoy the ride.

However, the road to retirement is just not that simple, especially these days and if you happen to have less than desirable credit. Even if you don’t foresee the need to take out a personal loan or finance a new car, it is essential that you stay on top of your finances and ensure you have nothing but the best of credit no matter where you are in life.

Your Credit History is Your Future
Credit scores and personal credit history reports are the hallmark of how you manage your money and your credit. During your working (and younger) years, you may have had a few mistakes that cost you some points on your credit scores. Even if you have managed to maintain your finances, the changes in the credit industry may have also caused your credit score to become lower. There are now new standards to follow in the credit industry and lenders are even more stringent than ever and require a much higher credit score than consumers could get away with in previous years.

These changes matter to you especially if you are planning to seek any type of credit in the future. But they also make a difference if you have no need for financing. These days it is well beyond the scope of good lending practices for having good credit. There are now other entities that lean on a person’s credit score for a variety of reasons.

Who’s Asking for Credit Checks?
As you approach the age of retirement, you likely have been working to pare down your expenses on every level. With a credit score that is less than perfect, you may end up paying way more than you can afford in your budget for a number of things. There are several relevant industries that will use your credit score to make decisions. These sources include:

·         Landlords/Property Managers - If you are planning to downsize and move out of your home in order to rent in a retirement-type community or just to a smaller place, your application may not get approved if you have a bad credit history. Since your ability to handle money is represented in your credit history and calculated score, a low score can signal to these rental agents that you may not be reliable enough to meet rental obligations regardless of how much you have saved for retirement.

·         Insurance Companies – If you own a home and/or drive a vehicle, you will continue to need auto insurance. The insurance agent will often pull a credit check on you in order to give you a premium rate. Those with lower credit scores will have to pay a higher premium rate than others with better scores. Insurance companies, like many other businesses, have made a correlation between people with bad credit histories and the amount of claims they file in a lifetime. Essentially, a bad credit score represents risk to the insurance company. In turn the insurance company will be sure to charge you additional money to cover that risk.

·         Part Time Work – Even in retirement, many people still are content to work part time as a way of earning extra cash or in order to get out of the house on a regular basis. Employers, even those who are hiring for part time positions, often run credit checks on applicants. If you are up against someone who has perfect credit, you may lose out to the other applicant. This is especially true if you are working in any type of financial position or are applying for any type of government job.

As we get older, our financial priorities do get more refined. We know more about what we need to do to become and stay financially stable. It is important to always stay on top of our credit scores even if we don’t think we need financing for any reason. Regardless of how much money you have in your retirement accounts, it is that little three-digit number which can have a huge impact on your life just when things start getting good.

Be sure to keep requesting the free annual copy of your credit report and make sure your information is correct. Be on the look out for fraudulent use of your identity on those reports and dispute any incorrect information as soon as you spot it. If there is erroneous information, look into credit repair. It is your financial obligation to ensure your credit report is as healthy as it can be and regular follow up is highly recommended.

This was a guest post by Ed O'Brien. Ed O’Brien is a seasoned writer with a strong background in business and personal finance. His blog, Credit Repair, offers free advice to those seeking ways to improve their credit scores.

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