Retirees, and especially individuals looking to retire early, may wonder if their credit score matters after they retire. The short answer is that it does. You may still need to borrow in retirement, and your credit report significantly affects your ability to do that. 

Individuals with good credit scores get more favorable interest rates on loans. They are also more likely to be approved for loans, to begin with. Higher credit limits are allotted to people with good credit, allowing you to enjoy more of your golden years. 

While your relationship with money may change dramatically upon retirement, it will still be a necessary part of your life. The following are some things your credit score will affect even in retirement. 

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Buying A New Car

Your credit will be checked when purchasing a new vehicle. Many people buy new vehicles after retiring for either travel purposes or to downsize. You may even decide to sell your home entirely and purchase an RV home in which to travel. 

Fortunately, you are unlikely to be denied a car loan even if your credit isn’t stellar. This is because vehicles are easier for banks to repossess should you default on the loan. However, a vehicle will cost substantially more due to higher interest rates if your credit is bad. 

Buying Property

You may still purchase property in retirement, even if you aren’t planning to. For example, you may downsize from your existing home into a condo. Health issues may necessitate moving into an assisted living facility. A better credit score will make it easier and cheaper for you to buy a property of any kind. 

Even if you plan to rent, landlords check credit as well to evaluate the risk of taking you on as a tenant. In fact, your income and credit history are two of the biggest factors landlords evaluate when reviewing your application. Be sure to budget appropriately for your living costs in retirement. 

Refinancing A Mortgage

If you are still paying a mortgage in retirement, it may be a smart idea to refinance your house. Doing so can help you save significant amounts of money on your monthly mortgage payments. However, to get a good deal on refinancing, your credit score has to be good. 

Remember that borrowing against your home equity can affect your credit score. Go in with the best credit score possible and a solid understanding of how a refinance can affect your credit. Your lender can even cancel your refinance loan if your credit score falls below a certain level. 

Keeping Low Insurance Rates

Certain states do not allow credit rating to affect insurance rates, including California, Hawaii, and Massachusetts. If you live anywhere else, insurers can take your credit rating into account when determining your rates. The lower your rating, the higher your rates will be. 

You cannot afford to live without certain types of insurance. In particular, the costs of not carrying adequate homeowners insurance are too high to be worth the risk. Car insurance is legally mandatory. You may also need to carry insurance on items such as boats or RVs. 

Facilitating Better Travel

The freedom to travel is one of the biggest perks of retirement, especially retiring early. Some credit cards give you incredible rewards you can use to travel for cheap or free. However, these cards all require a very good credit score to be approved for them. 

It can also be difficult to travel without a decent credit limit. Doing so can take away money from other necessary expenses. This can create a cash flow problem that could be a real issue under the right circumstances. Never charge more than you can comfortably repay. 

Avoiding Identity Theft

If you haven’t checked your credit score much in retirement, you may be at higher risk for undiscovered identity theft. Identity theft is particularly high among seniors because there are many scams targeted to that demographic. Knowing the status of your credit and being in control of it is key to detecting identity theft immediately. 

Credit cards also offer protection against fraudulent purchases that other forms of payment do not. Aside from guarding against identity theft, credit cards can also come with added warranties for items you purchase. 

Starting A New Business

Upon retirement, you may decide that you don’t want to actually stop working. Retirement can be an excellent opportunity for pursuing a lifelong dream, hobby or passion. To do this, you may be considering starting a small business. 

Many businesses will require loans to set up. Like other loans, you will be charged a higher interest rate the worse your credit score is. This added expense will be a burden on your business from the beginning and make it more difficult to remain in business. It will also be much more difficult to get a business loan at all if your credit worthiness is poor. 

Existing Debt

If you have outstanding debt upon retirement, you will want to maintain a good credit score to keep interest rates low. Credit card issuers regularly change the interest rates of cardholders depending on how their creditworthiness changes. 

Interest can accumulate quickly and put you in a bad financial situation. This is especially true if your interest rates suddenly or gradually increase due to a decreased credit score. Do not let this happen. Continue to pay off debt and maintain a good credit score, and you will pay less in interest over time. 

Getting A New Job

You may not plan to get another job after you’ve retired, but plans can change. Perhaps you decide you need something to do or could use the extra income from a part-time job. Neither of these situations is uncommon among retirees, and you should be prepared for the possibilities. 

If you do get another job at any point, your credit score will be something your potential employer views. While it certainly isn’t the only factor in determining whether to hire someone, it can be a red flag for an employer if you fail a credit check. A hiring manager is going to view someone with strong credit as a more reliable candidate. 

Supporting Family Members Financially

You may be financially well-off, but your family members, especially your children and grandchildren, may not yet be. This often results in parents giving their children a little financial help every once in a while. Unfortunately, doing so can become more difficult and costly if you have bad credit. 

Being able to cosign for children who need help to get loans of their own is a major way parents help their kids. Doing so can help ensure your children get loans and at favorable rates. You can be a cosigner on things such as leases, car loans and more. However, you need to have good credit to be a cosigner. 

Preparing For Healthcare Costs

As you get older, you will often run into increased medical costs. Even if you have saved for retirement responsibly, medical expenses incurred due to age-related conditions can add up quickly. 

A high line of credit, which you can only get when you have and maintain good credit, will help you pay for these medical expenses. Hospitals are also more likely to agree to a favorable payment plan if your credit history is good. 

Preparing For Emergencies

A good credit score will give you a higher line of credit to cover the costs of any emergencies when they occur. You need to be prepared to financially cover emergencies no matter your age. Unexpected expenses are sure to occur at some point during your retirement. 

Emergencies where having good credit and a higher credit limit can pay off include car repairs, home repairs, medical bills, and other possible necessities. You may need to borrow to cover these costs, and the loans will cost less if your interest rates are lower due to good credit. 

Other Places That Check Credit

Other places check your credit you were probably not even aware of. For example, cell phone companies will give better deals to individuals with good credit. Utility companies will also do a credit check when you set up services with them. 

Your credit undeniably plays a major role in your life at any age. It is one of the best tools you have to prove your financial reliability in a wide variety of circumstances. Maintain good credit so it won’t affect unforeseen areas of your life. 

Retiring is ultimately no reason to stop monitoring your credit score. Check it regularly to ensure your score is good and that there are no issues such as fraud occurring. Maintain good credit by paying bills on time, keeping a budget and using your credit responsibly. 

Do you have a question or anything else to add? Be sure to leave a comment.

Thank you John Blakely for this informative article contribution to Leisure Freak

About the Author:

John Blakely has had a passion for all things personal finance for over a decade. He is a firm believer in having big financial dreams and executing on a plan to realize them. He is an Education Ambassador for ScoreSense where you can find more of his writings.