Have you thought about your credit score lately? Some seniors assume that because they are not going to make any more big-ticket purchases, there is no longer any need to worry about their credit scores. This is a mistake. Even if a senior never takes out a new mortgage or finances a car, credit scores are still an important matter. Reductions in your credit score could lead to higher costs for auto and homeowners’ insurance.
A simple transaction like getting a modem from your cable tv provider may involve a credit score check. A more serious concern could be unexpected difficulty in moving into a senior housing or retirement community. A bad credit score could make you ineligible or require a substantially higher security deposit. A poor credit score could even affect a senior’s employment status if they are seeking a new job. In short, seniors should pay attention to their credit scores and take care to maintain them at the highest level possible. It is a common myth that simply being retired will reduce your credit score.
The credit reports used to determine your credit score do not contain any information about your work status or income. Instead, credit reports record your history of borrowing and paying back. This history includes loans like home mortgages and car loans as well as credit card purchases. Companies that issue routine bills (electric, water and gas utilities) also report credit data. Major events like foreclosures, bankruptcies or repossessions are also included in this record.
These records are subject to time limitations. In most cases, negative events are deleted from credit reports after 7 to 10 years, and records of loans and payments include only events of the last 10 years. If a senior had a bad credit experience as a young person (over 10 years ago), this information should not be on their credit record today. Here are a few need-to-know facts about credit scores:
• There are 3 credit reporting agencies: TransUnion, Equifax, and Experian. They all collect and maintain information on credit records.
• Seniors should check their credit reports regularly. If you find errors on your credit report, take steps to correct them.
• You are entitled to a free personal credit report from each of the agencies once a year. To learn more, go to AnnualCreditReport.com. Those are the basic facts, but how does a senior go about maintaining a good credit record?
The first step is to take advantage of the free annual report mentioned above. Make certain that the information contained in each of these reports is correct. After that, understand the difference between “credit reports” and “credit scores.” Based on the data in the credit report, each of the three agencies gives the person a credit score. This score is typically represented in a “FICO” number ranging from 300 to 850; the higher the score, the more a person is creditworthy. Seniors should be happy to learn that people 60 years old and above have the highest average FICO score (749).
By the way, “FICO” is a trademarked name owned by the Fair Isaac Corporation, the company that created the system. There are some things a senior should do to keep a high FICO score or to strengthen one that needs some work. These are the same measures that any person should take, but seniors have some special circumstances. Since seniors already have a lengthy credit history, they probably have less need for some types of credit and are more settled in their circumstances. On the other hand, seniors probably have lower incomes and are more likely to face expensive emergencies like medical problems.
Payment history is the most important factor in determining a FICO score, so be sure to make all payments on time. This includes repetitive payments to utilities and other monthly expenses as well as bank credit cards, auto loans or mortgages. Be sure to mark those due dates on your calendar, making even small payments on time. If you are unable to make an on-time payment, contact the creditor or seek financial help. The number of open accounts can affect your FICO score.
It may be a good idea to close unused accounts. FICO computers look at the total amount of credit you have available, compared to the ability to pay it off. An open account, even with no owed balance, makes this ratio look weak. Resist offers to open new accounts like, “Ten percent off today’s purchase if you open a credit account today.” The total amount owed is another important factor in FICO scores. If you can do so, paying down existing debt will increase your FICO.
However, think carefully before doing this as some debt, especially home mortgages, may have been issued with very favorable terms. It makes sense to pay off high-interest debt like credit cards before reducing low-interest loans like home mortgages. All of this is good advice, but what should a senior do if they are having difficulty making a payment that is due soon? One of the OurSeniors.Net family of trusted partners, BMG Money, is there to help with good advice, counseling, and a loan that is affordable and quickly available. BMG offers several special programs aimed at retirees. Instant funding is often available.
Many borrowers get their loan proceeds deposited in their bank accounts on the day of loan approval. A BMG Money loan can help to build your credit history, offering a competitive interest rate with affordable and automated payment plans. For more information about BMG Money or to apply for loans online, visit the company’s website https://www.bmgmoney.com/. Client support is available Monday through Friday, 8:00 a.m. to 7:00 p.m. Eastern Standard Time at 800.316.8507. All loans offered are subject to eligibility, underwriting and approval. Terms and conditions apply.
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