Why it pays for Seniors to maintain good credit
The benefits of maintaining good credit include looking more reliable in the eyes of prospective employers and securing lower mortgage interest rates when buying a home. Those rewards can benefit anyone, and they’re especially enticing to young people. But what about seniors? Do individuals stand to benefit significantly from maintaining good credit into their golden years?
According to credit reporting agencies, senior citizens tend to have the best credit scores of any consumer demographic. That could be a byproduct of years of financial discipline, and there are many benefits to maintaining that discipline into retirement. Home buying and borrowing:
Buying a home is often considered a big financial step forward for young people, but that doesn’t mean aging men and women are completely out of the real estate market. In its 2020 “State of the Nation’s Housing” report, the Joint Center for Housing Studies (JCHS) of Harvard University reported, the share of homeowners age 65 and over with housing debt doubled to 42 percent, between 1989 and 2019. In addition, 27 percent of homeowners aged 80 and over were carrying mortgage debt, in 2019.
If they choose to refinance their mortgages after retirement, maintaining strong credit can help homeowners, who still have mortgage debt, get better terms. Even seniors who have paid off their mortgages can benefit from maintaining good credit, if they decide to downsize to a smaller home but still cannot afford to buy the new home outright.
Rewards: Retirement is often associated with travel, recreation and leisure. Such pursuits can be more affordable when seniors utilize rewards-based credit cards which help them finance vacations, weekend getaways and other expenses associated with travelling. Seniors who maintain strong credit ratings into their golden years may have more access to the best travel-based rewards cards than those whose credit scores dip in retirement.
Unforeseen expenses: No one knows what’s around the corner, but savvy seniors recognize the importance of planning for the unknown. The COVID-19 pandemic seemingly came out of nowhere, and among its many ripple effects was the sudden job loss experienced by seniors. The JCHS report found, 21 percent of homeowners, age 65 and over, had reported a loss of employment income related to the pandemic. Unforeseen medical expenses also can compromise seniors’ financial freedom. Maintaining a strong credit rating, into older adulthood, can help seniors navigate such financial uncertainty more smoothly.
Such a strategy can help seniors secure low-interest loans or credit cards to help them pay down sudden, unforeseen expenses, without getting into significant debt.
The importance of a strong credit rating is often emphasized to young people. However, a strong credit rating can be equally beneficial for seniors.