Top Three Mistakes Baby Boomers Make with Credit
Baby Boomers nearing or entering retirement begin to think less about maintaining good credit which can lead to mistakes, which lower your credit score and ultimately cost you more money. Today, more companies use credit to evaluate applications, which can range from a loan decision, deposit requirements for utilities or phones, rental applications, and car insurance.
According to a recent Trans Union report, nearly 20% of Baby Boomers currently have sub-prime credit. Preventing credit mistakes will save money and help you maintain good credit health throughout retirement. Here are the top three mistakes seniors make.
Closing accounts. Paying down debt often becomes a top priority for those preparing to enter retirement. Paying off debt and closing credit cards can lead to a lower credit score. The FICO score calculation gives credit utilization a 30% weight, which considers the total available revolving credit compared to current balances. Closing paid off credit cards lowers your available credit and will keep the utilization percentage high, lowering your score. Leaving accounts open and paying off any balance every month will increase your score without driving up debt.
Co-signing loans without understanding the impact to credit. When you co-sign a loan, you have an obligation to pay the loan off if the primary account holder fails to make payments. Typically, co-signers do not receive statements leaving you vulnerable to late payments, fees, and derogatory marks on your credit. When you co-sign a loan, be sure to monitor the account to ensure it gets paid on time.
Lack of vigilance towards identity theft. Many thieves target seniors, stealing your money or opening fraudulent accounts in your name. Checking your credit report at least once a year will help you spot fraudulent accounts before they impact your credit.
Credit matters in every stage of your life, even if you no longer need to borrow money.