If your credit is a mess right now, and you’re considering retiring soon, then you’re probably wondering what the impact will be on your retirement. Will having poor credit impact your retirement?
1. Does Retirement Affect Your Credit
There are several scenarios in which having poor credit scores or no credit scores at all could negatively impact your retirement planning. Your chicken and egg scenario simply did not seem fair, but somehow, perhaps with the first credit card, you were just well on your way to boosting your credit score. In reality, however, you could be living on a cash-only life almost entirely void of credit cards, leaving you with no usable credit history to speak of. However, even if you stop utilizing credit cards altogether, think about the following new paradox:
If you stop paying your bills, how long before you start accumulating more debt? A good credit score means nothing if you can’t access the money you need to pay your bills. The longer you go without timely payments, the worse your financial situation becomes, since your debts will grow. It will become increasingly difficult to catch up as you go along.
On the other hand, if you start living a life that involves regular expenditures (and if you’re able to catch up even after you stop paying your credit cards), then your retirement prospects may actually improve. You’ll be less likely to have so much debt hanging over your head, and you’ll have more income to spread out. This will reduce the overall burden of your retirement funds, which in turn will boost your score as much as 20 percent!
But this assumes that your credit score is already at the level you’d want it to be. Ideally, it should be higher, since older people tend to have lower FICO scores than younger people. You can improve your FICO scores by updating your credit report for the most recent information. This can affect your credit score, even if the actual numbers aren’t terribly affected.
It’s possible that, even with a high credit score, your debt may affect your retirement. After all, it’s unlikely that you’ll have many large bills once you retire. It’s also unlikely that your debts will affect your ability to maintain decent health care coverage or essential day-to-day living expenses.
2. How To Keep Your Credit Score Up During Retirement
For many people, their entire life is lived on one or two credit accounts. Those credit cards are used for groceries, electricity, clothing, gasoline, entertainment, and everything else you use and need to survive in this society. At the end of the month, if you don’t have enough money to pay all the bills, then you go out and use your credit card to make that few extra dollars so you can pay for your car, house, and everything else you forgot to buy. If you haven’t paid your bills on time, then your credit is shot, and now you are suffering through what is known as a credit crisis. Do you know what happens next? Well, depending on your credit crisis, it could be downhill the rest of your life.
In retirement it is important to continue to make smart financial decisions for your savings and credit score – for instance continue to make on time payments to all of your bills including your AEP Ohio bill to stay in god credit standing.
If you are at the top of the financial scale, then you probably already know how important good credit scores are. Your credit accounts will determine your ability to qualify for a loan or a job, and that means that it is very important to keep up those accounts. You have probably got all the necessary accounts with a credit card company, such as utilities, mutual funds, credit cards, and even savings accounts. Unfortunately, your chicken and egg scenario hardly looked fair, but at least, you were on your way to building your credit. Now, after years of living paycheck to paycheck, you are probably living in an all cash lifestyle almost completely debt-free.
After you have built up those credit scores, there is a good chance that you won’t have to use credit again ever again. This is because the banks and lenders won’t be willing to give you loans, mortgages, or other forms of credit after you have a poor score. That’s how you get a great score, by building it up the hard way, and then keeping it up.