Retiring is part of the American Dream. Leaving behind the daily hassles of a job and living a relaxed life – what could be better? Saving for retirement is an important step toward that golden lifestyle, but there’s another that’s equally as important – preparing your credit score for your retirement.
Good credit can be an invaluable retirement tool. It can help you secure a good mortgage if you choose to finance your retirement home, or ensure you get the best terms possible on an auto loan when you scale down from the family minivan to that cute little roadster you’ve always dreamed about.
Any change in your financial status can potentially change how the credit bureaus calculate your score. But with some preparation, you can maintain the lifestyle you desire – and your credit score – when you retire.
Fortunately, the same habits that earn you a good credit rating while you’re working, will serve you well in retirement. Continue to pay bills on time, maintain a good ratio of credit used to available credit, and a good variety of types of credit used.
As you approach retirement, you should take a few additional steps to ensure you’re well-positioned to preserve your credit score once you’re no longer working.
The credit bureaus generally include your ratio of available credit to credit used as 30 percent of your overall score. Keeping your outstanding debt to a minimum can help improve your score. Plus, fewer debts will mean it’s easier to keep money in your pocket, taking care of you in retirement, for as long as possible.
How much you have in retirement savings doesn’t directly factor into the formula that makes up your credit score. But having enough set aside to fund your life in retirement can help ensure you’ll be less dependent on credit for day-to-day needs – so you can save your credit purchasing power for when you really need it.
Keep checking your credit
If you’ve always monitored your credit, don’t stop just because you retire. In today’s fast-paced, digital world your credit can change quickly and you need to know about it right away so you can respond. Regular credit monitoring can also help ensure you catch fraud as soon as it happens; retirees are a favorite target group for identity thieves.