• How To Improve Your Credit In Retirement

  • by Guest Author
Improving Credit Score

If you are retired or are planning to retire, you might want to know what your options are when it comes to improving your credit profile. Your credit profile includes your credit report and credit score.

No matter your financial situation as a retiree, you’ve still got options when it comes to improving your credit. Contrary to popular belief, you do not have to let a fixed or limited income keep you from having a good credit score. While it is always best to talk to your financial advisor, we have a few tips for improving your credit.

What Affects Credit Score?

According to the FICO website, your credit score is impacted by a number of factors:

  • Credit mix (10%)
  • Length of credit history (15%)
  • Payment history (35%)
  • Amounts owed (30%)
  • New credit (10%)

Though the weight of each of these factors can vary from person to person, this gives you a general idea of what can impact your credit score.

How Can You Improve Credit in Retirement?

You can start by doing the basics, such as always paying your credit accounts on time and as agreed. Payment history has such a significant effect on your score, that it’s one of the most important things you can do to improve it.

Another category to pay attention to is your credit utilization ratio. Are you maxed out on all of your tradelines (credit accounts)? If so, consider paying down balances on as many accounts as possible. Doing this can also have a big impact on your credit score, as this accounts for 30% of your FICO credit score.

Finally, request a free copy of your credit report at Annual Credit Report from all three credit bureaus once a year. Check the reports frequently to make sure the information is correct. Dispute any information that is incorrect or not up to date.

What if You Can’t Do Anything to Improve Your Credit?

If these suggestions are out of reach for you due to income limitations, it might be time to change your spending and earning behaviors. For example, if you cannot pay your bills on time and as agreed, you may need to examine your spending habits or find additional sources of income to make this possible.

You could also consider a reverse mortgage to consolidate your debts. That means you’ll use your proceeds from the loan to pay off those existing debts and then have only one debt to manage – the reverse mortgage. That way, you are not accumulating interest on a number of different debts at different interest rates. You are only accumulating interest on the reverse mortgage. And since a reverse mortgage does not require monthly payments, you won’t have to worry about spending your monthly income paying down each of those bills. With a reverse mortgage, you can pay as little or as much as you want when you want – as long as you continue to pay your property taxes, homeowners insurance, and home maintenance costs.

If you are a homeowner who is 62 or older and have enough equity in the home, you may qualify for a reverse mortgage. The great news is that this product is not dependent on your credit score, though credit history is reviewed to make sure you are in the best position to succeed with your loan.

Aja McClanahan is a freelance writer and owner of www.principlesofincrease.com.