How to maintain your credit score and use credit cards in retirement


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You’ve been working toward this day your entire adult life. You’re almost ready to say goodbye to the 9-to-5 (or 9-to-6 or 7-or-8) grind and retire. Maybe your plans include travel, a move to a luxurious retirement community or day trips with the grandkids.

Maintaining your credit is just as important in retirement as it is throughout your working life. It’s time to put your lengthy credit history and good credit score to work. You can leverage those travel rewards you’ve earned, and you can stretch your retirement savings further by continuing to use credit responsibly.

A good credit score helps you secure the lowest rates on purchases like a car loan or mortgage, which could be important if you’re right-sizing your living quarters or getting a new vehicle for your golden years. If you decide to finance something like a cruise or vacation home, you’ll also need good credit to get the best rates.

There are a few steps you can take to get your credit in tip-top shape before retirement — and keep it there throughout your life.

Plan ahead: Prepare your credit for retirement

If you’re still carrying mountains of debt from your younger years, it’s time to formulate a plan to pay it off ASAP. Consider opening a balance transfer credit card with a long 0% introductory offer, and then committing to monthly payments that will wipe out your debt interest-free before that intro APR expires. Examples of balance transfer cards include:

  • Discover it® Balance Transfer has an intro 0% APR for 18 months from account opening on balance transfers. The card’s regular APR ranges from 13.49% to 24.49%, variable. The card also charges no annual fee and earns 5% cash back in quarterly rotating categories (up to the quarterly maximum of $1,500 when you activate, then 1%), along with an unlimited 1% cash back on all other purchases.
  • The Citi Simplicity® Card delivers 21 months with 0% introductory APR on balance transfers with a variable APR of 14.74% to 24.74% after the introductory period ends. Citi Simplicity is great for those on a fixed budget, as it lets you set your monthly due date and promises no late fees, ever.

Good news for older adults when it comes to credit

Even if you’re carrying some debt, there’s good news for soon-to-be retirees. The length of your credit history and the average age of your accounts — as well as how recently you’ve been active with those accounts — make up 15% of your credit score. If you opened your first card during college, as many Americans did, that history drives your score up.

What’s more, minor blips such as applying for a new credit card will have less of an effect on your score than it would if you were new to managing credit.

Keep up the good work

To maintain your credit score, keep any long-standing accounts open and always make on-time credit card payments.

If a card goes unused for too long, your credit card provider may decide to close it. Closed credit cards reduce the average age of your accounts, damaging your credit. Eventually, that card’s history of on-time payments also drops off your credit report, which could further reduce your score.

Also, credit bureaus and lenders view too much untapped credit as a liability. They want to see you managing credit responsibly — not letting cards gather dust in your wallet.In fact, if you fail to use your cards long enough, you could find yourself with no credit score — a problem you may have thought you defeated in your college years. It’s wise to continue using your credit cards in your retirement, especially when you consider how many rewards you could earn for doing so.

Pick the right card for you

If you’re entering retirement with no outstanding debt, congratulations! It may be time to apply for a new card that will yield the best rewards on the purchases you plan to make moving forward.

Your lifestyle — and your spending habits — may change when you retire. Maybe you’ll spend more time dining out. Or maybe you’ll buy more groceries because you love to cook and didn’t have the energy when you were working all day.

Do you plan to travel? Will you be entertaining family? Spoiling the grandchildren?

With a credit score of 670+, considered “good to excellent,” you can snag a top-tier rewards card that will earn cash or rewards in the categories where you spend the most money.

Bankrate has ranked the Capital One® Venture® Rewards Credit Card as a top travel card, offering 10X miles on hotels purchased through through January 2020, plus 2X miles on all other purchases.

The welcome bonus of 50,000 miles once you spend $3,000 on purchases within 3 months from account opening can help kick off your retirement travel adventures. Be aware, the card carries a $95 annual fee (waived the first year) and a variable APR of 17.24% to 24.49%.

If you’re looking for a card to cover your dining and entertainment expenses, consider the Capital One Savor® Cash Rewards Credit Card, with an unlimited 4% cash back on dining and entertainment, 2% back at the grocery store and 1% on everything else. New cardholders earn a one-time bonus of $300 after spending $3,000 in purchases in the first three months. Expect a $95 annual fee, waived the first year, and a 15.99% to 24.99% variable APR.

Apply for any new cards before retirement, while you’re still showing regular income from your job, to increase your approval odds.

Request a credit line increase to boost your score

You want to maintain your good-to-excellent credit score throughout your retirement, so you can keep garnering rewards for trips, treats or even paying your bills.

But you don’t want to run your cards up to their limits every month, even if you can afford to pay them off by the due date.

Your credit utilization, or your total credit debt vs. your total available credit, makes up 30% of your credit score. You want to keep your credit utilization as low as possible; experts say keeping your balances below 30% of your available credit can help your score.

Request credit line increases on existing accounts while you’re still employed, when your chances of getting approved are greater. Then rack up the rewards, pay your outstanding balances on time, and maintain your good credit standing.

Continue to protect your credit during retirement

Making on-time payments, keeping older accounts open, and using your cards every few months can help maintain your credit score.

But it’s also important to keep tabs on your credit file. Get a free copy of your credit report from each of the three credit bureaus (Experian, TransUnion and Equifax) annually to make sure no one has opened any accounts in your name. The Federal Trade Commission reported that 35% of fraud complaints came from seniors ages 60+. The best way to combat fraud is to remain vigilant about reviewing your accounts.

Read your credit card statements carefully each month to make sure you know what’s being charged. Whether you have an authorized user on your card who accidentally overspent or you’ve been a victim of fraud, you’re more likely to spot the problem if you’re checking your statements each month. You can also set alerts on your accounts to notify you when a purchase is made.

Finally, think carefully before co-signing a loan for anyone. A default on a loan you co-signed is also reflected on your credit reports and can hurt your credit score.

Consider hiring a financial adviser

Your finances may change substantially in retirement. You may have less income — or more income, depending on investments you’ve made.

As you approach retirement, it’s wise to speak to a financial adviser to see where you stand. Do you have enough saved to live the lifestyle you want without going into debt? What steps can you take to help your money work harder for you if you have five years or less until retirement?

Whether you’re nearing retirement or that happy day has finally come, a financial adviser can help you make the most of your retirement savings so you can enjoy the life you’ve worked so hard for without overspending.