A Baby Boomer’s Guide to Credit Scores

Baby boomers have a long credit history behind them. With an average score of 742, many boomers who have spent a lifetime saving and paying off debt are enjoying the benefits of a high score as they enter retirement.

Even with no mortgage or foreseeable need to borrow money, boomers should still pay attention to their score. Having a good credit score can make the retirement years smoother and offer several benefits for those in their golden years.

What your credit score means to you

If you’re a baby boomer, you’ve likely been in the credit game for some time. Your mortgage payments, credit cards, past loans, refinances and other credit activity over the years have all contributed to your credit history — for better and for worse.

As you approach retirement, you may have been able to pay off the majority of your debts. Having a paid-off house, car and credit card balance can give you peace of mind as you approach and enjoy retirement.

Something you’ll want to keep in mind, however, is that your credit score is still important to maintain even after you’ve paid off all your debts.

While you may not think you need to borrow money in the future — especially if your retirement account is well stocked, your house is paid off and you don’t have a car loan — keeping your credit score up can offer several benefits and a financial cushion when the unexpected happens.

What your credit score impacts

Your credit score can affect your finances, retirement plans and living situation. Here are some of the key areas to watch.

Cashing out on your home equity

Even if you’ve paid off your mortgage, your credit score can still play a role in leveraging your home’s value.

Taking out a home equity loan or a home equity line of credit (HELOC) can let you access the equity you’ve accumulated in your house. This can offer you a lower interest rate than a personal loan if you need cash for retirement, remodeling or other purposes.

When you do so, you’ll want to have a good credit score and history in order to both qualify and get a good interest rate. Lenders will run an inquiry on your credit history when they approve you for a home equity loan or HELOC and will require a minimum credit score in the mid-600s or higher.

The interest rate your lender offers you will also depend on your credit score. The higher your score, the lower your interest rate, which can save you money on your loan and get you a better deal than using your credit card or taking money out of your retirement accounts preemptively.

Co-signing on loans

Co-signing on a loan for someone can help them qualify for credit when they otherwise wouldn’t be able to due to poor or limited credit. This can be useful for helping a family member take out student loans, afford a car or get a personal loan.

When you co-sign for a loan, the lender will use your credit history and score to determine the loan terms and interest rate. If you have a good credit score, the primary borrower will get a better interest rate, which may be one reason you want to build or maintain a good score.

Co-signing does come with some risks. If the primary borrower misses their payments, the lender will report it for both you and the borrower, which will lower your score. When you become a co-signer, you’ll also agree to assume the loan if the primary borrower defaults, which means you’ll be on the hook for the balance, remaining payments and any late fees left by the borrower.

Travel

Your credit score can affect your next cruise, road trip or flight. Maintaining a good credit score can make your next vacation go more smoothly for a few reasons.

Having a good credit score lets you access exclusive travel credit card rewards, which can go a long way when you’re on vacation.

Travel mile bonuses on everyday purchases can help you fund your next flight, and many travel cards offer discounts on things like hotels and car rentals. Depending on your card, you’ll also be able to access perks like priority boarding and airport lounge access.

You’ll also want to have a credit card on hand for hotel bookings and car rentals. While hotels and car booking agencies can take a deposit or run a manual credit check, this isn’t always guaranteed if you lack a card.

Medical loans

Medical emergencies can quickly add up even if you have good insurance. Medical loans can help you cover the costs of care so long as you have the credit to qualify.

Medical loans are offered by banks, credit unions and even healthcare facilities if you aren’t able to pay for medical expenses up front. This can be a better option than putting your expenses on your credit card, since medical loans are fixed rate and can come with a lower APR than credit card debt.

Like with any other loan, lenders will run a credit check and determine both your eligibility and your interest rate based on your score and history. While it’s not impossible to get a medical loan with bad credit, you’ll have more options and get a better interest rate with a higher credit score.

Insurance premiums

Home, life and auto insurance premiums can all come cheaper with a high credit score, which can save you hundreds of dollars each year.

Having auto insurance is required if you want to keep owning and driving a car. Even if you’ve paid off your home, it’s still a good idea to maintain home insurance coverage in order to protect the equity you’ve invested.

With a high credit score, insurers see you as low risk and offer you lower premiums to incentivize you to stay as a customer, which can have a huge impact on your payments.

Annual car insurance premiums are twice as high on average for Americans with poor credit (580 and lower) when compared to those with excellent credit (800+), which can translate to thousands of dollars over a year.

Having a lower premium can also help you weather increases on your premium due to inflation and other factors.

Utilities

Credit scores are used by organizations other than lenders and insurers to evaluate your creditworthiness and riskiness as a customer.

If you decide to relocate to a new home that comes with a new utility company, you may undergo a credit check in order to determine whether you’ll reliably pay your water and electric bills on time.

If you don’t have a credit score, your score is too low, or your credit history doesn’t have any recent entries, you may have to put in a cash deposit with the utility company in case of nonpayment of bills.

Where you live

A paid-off house doesn’t mean your credit score won’t play a role in your living situation.

As you grow older, you may want to sell your home and move to a retirement home or assisted living facility. Many of these organizations will run a background and credit check when you apply, and require a minimum credit score or a history in good standing in order to qualify.

Even if you don’t plan on living in a retirement or nursing home, your credit score can still impact where you live. If you decide to move to an apartment, your landlord will run a credit check to determine if you’re a trustworthy tenant who will pay your rent on time.

If you decide to purchase a condo, a townhome or a house with a homeowners association, your HOA may also run a credit check before they allow you to buy in their community. Having a good credit score can make the application process go more smoothly and avoid delays, rejections or having to pay an extra deposit.

What to watch in your credit report

Having a long credit history can be advantageous if you’re looking to boost or maintain a good score. In your later years, here are the key areas to focus on in order to get the most out of your score and catch any red flags early on.

Signs of fraud or identity theft

Over half (56 percent) of victims of identity theft reported to the Identity Theft Resource Center are ages 55 and older, making baby boomers a prime target for phone, mail and electronic scams aimed at stealing personal information.

Fraudsters will use sensitive information such as your Social Security number, bank account numbers and passwords to open credit cards and take out loans in your name, leaving you on the hook for the balance as they run away with the money.

Watching your credit report for signs of identity theft is crucial, as accounts you’re unaware of can quickly wreck your score from missed payments and maxed-out cards.

Freezing your credit when you don’t otherwise need a loan or a new credit card can stop thieves from accessing your credit. The process is free, and you’ll still be able to use your credit card and pay off your loans as normal.

Checking your credit report for missed payments, new accounts you didn’t authorize or inquiries you didn’t initiate will also help you catch fraud before it can get out of hand. Any suspicious activity should be reported to your card provider, the credit bureaus and to the federal government at IdentityTheft.gov immediately.

Old inquiries and payments

Having a long credit history means that you’ll have a large number of entries on your credit report, all of which will contribute to how your credit score is calculated.

While positive history, like on-time payments, will stay on your report for as long as the account is open, negative entries will eventually come off of your report after a certain period of time.

In general,

• Hard inquiries drop off after two years.
• Money you owe to the government drops off after seven years.
• Late or missed payments drop off after seven years.
• Foreclosures and short sales drop off after seven years.
• Debt in collections comes off after seven years.
• Chapter 13 bankruptcy comes off after seven years.
• Chapter 7 bankruptcy comes off after 10 years.

Medical debt under $500 isn’t counted on your report, even if it has been sent to collections.

If you find old debt or missed payments on your credit report that haven’t dropped off per the timeline, you can file a dispute with the credit bureau providing the report.

Lines of credit you don’t use

If you have several credit cards and aren’t using them as much as you used to, you may want to consider closing an account or two or re-evaluating your card usage.

However, keep in mind that closing down a credit card account could drop your credit score, as your utilization ratio and average age of accounts will drop. If you find that you’re not using a credit card at all, either incorporate it into your spending habits — such as running a recurring expense on it and paying off the balance automatically — or consider closing it.

Having too many unused lines of credit may hurt you in the long run. If you’re paying annual fees on a card you don’t use, your money might be better spent elsewhere. The card issuer can also shut down inactive cards after a certain period of activity.

Old cards can also be an entryway for fraud or misuse, which is why you should keep an eye on your account balances and make sure there are no suspicious charges on them.

Your debt repayments

If you’re still paying off debt—whether it’s your mortgage, an old medical loan or your credit card balance—you’ll want to monitor your payment history.

The payments you make on your debt factor into your credit score by a huge degree. Missing a payment by 30 days or having a loan end in default or bankruptcy can have a massive negative impact on your credit score. These marks can stay on your credit report for several years.

If you’ve previously missed a payment, have had a debt go to collections or gone through bankruptcy, you may want to consider reviewing your credit report and seeing if you can get the entry removed if it’s old enough.

How to boost your credit score

Maintaining and boosting your score as a baby boomer doesn’t have to be hard, and can come with several benefits that can last you throughout your later years.

There are several key areas you should pay attention to when keeping your score up, including:

• Making your payments on time. Setting up autopay, making sure your debt repayments are factored into your budget and strategically making payments can help build a positive history and pay off your debt more quickly.
• Maintaining at least one credit account. Closing all your credit cards, even if you don’t think you’ll need them, can hurt your credit score, as you’ll have no way to maintain your history and a high utilization ratio. Keeping one or two cards for everyday expenses and paying off the balance can help maintain your account and get you card rewards.
• Paying off old debt. If you’ve been keeping an old credit card balance or have an old debt you’ve been making minimum payments on, paying it off and clearing it from your credit profile will save you interest, better set you up for retirement and help boost your score in the long run.
• Watching for signs of identity theft. Freezing your credit, setting up card alerts and being wary of online and phone scammers can prevent bad actors from using your information to open new accounts and abusing your credit.
• Cleaning up old entries on your credit report. Regularly reviewing your credit report can help you catch old entries that may be holding you back and look for inaccurate items you can dispute and remove.

Tools to boost your credit score

Even if you’ve been building credit for a long time, it’s never too late to learn more about the resources available to you. Here are some tools you can use to your advantage.

Tools to view your credit score

Keeping an eye on your credit score and checking in on your credit report will help you catch any red flags that may come up. There are a few ways to do this.

You can request a free credit report once a year from TransUnion, Equifax or Experian. These three bureaus also offer paid services that allow you to view your report and score at any time.

You can also sign up for a third-party service that will provide your score and pull your credit for you. Some services offer this in exchange for your contact information, through which you’ll receive card and loan offers based on your score.

Your bank or credit card may also offer this service for free.

Tools to monitor your credit

Monitoring your credit score is a good way to see what’s holding you back and catch any red flags in your credit report that may indicate fraud or identity theft.

Besides frequently checking your report, you can sign up for a credit monitoring service. This service will monitor your credit and send you alerts when new activity appears on your report, in your bank account or on your card.

Freezing your credit prevents anyone but you from making hard inquiries on your credit, blocking them from taking out loans or applying for cards. Freezing is a free process that can be done online through any one of the three credit bureaus.

Tools to clean up your credit history

Having a long credit history means many entries have accumulated on your report—some of which may be holding you back. Fortunately, you can dispute these entries and keep inaccurate or outdated information from dragging down your score.

While you can do this manually, you can also use a credit repair service like Lexington Law.

Lexington Law pairs clients with a team of experienced attorneys and legal professionals who know what to look out for in your credit report. Falsely reported missed payments, long-paid debts still marked as outstanding and other inaccurate information can all pull down your credit score, and Lexington Law’s team is ready to track down any entries that aren’t accurately reflected in your report.

If you’re ready to clean up your credit history and rest assured that your good credit score can serve you during retirement, you might want to consider working with Lexington Law.

The bottom line

Baby boomers, no matter what their credit score may be, should pay attention to their credit history as they move into retirement. Maintaining or boosting your score, even after you’ve paid off your debts, can save you money on insurance, keep your options open for future loans and net you perks for travel and other activities.

Boomers should be especially careful to watch their credit reports for signs of identity theft or inaccurate entries. Using services like credit monitoring agencies and credit repair firms can help you catch fraud in the act and clean up your credit history for a smooth retirement and financial future.