The Retiree’s Guide to Credit Management

The Retiree’s Guide to Credit Management

The Retiree’s Guide to Credit Management

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Here’s one question that’s frequently asked: “is managing my credit in retirement different, really?” The quick answer is no—the same rules that apply for managing your credit still hold true. However, there are things you should be aware of throughout your golden years to keep your credit in good standing.

Before we jump into some easy credit management tips, let’s look at why it’s important. You know that a great credit score is typically associated with better rates for credit cards and loans, but that’s not all. Many insurance companies (you know, the guys who cover your cars and home) use credit scores to assess risk, and therefore, price rates. Bottom line: the more responsible you appear, the more likely they are to give you favorable rates.

With that in mind, let’s look at four ways to manage your credit now that you’re retired:

Never miss a payment

In most credit scoring models, the number one category goes to on-time payments. Approximately a third of your credit score is based solely if you pay on-time when you’re supposed to—which applies whether you’re working, retired, on vacation, or in any other circumstance.

Hopefully being retired means that you have fewer bills to deal with, but that’s never an excuse to let a payment lapse. Keep a journal, ask your bank to send you email reminders, or set up autopay when available so that you can pay on time and keep your credit score as high as ever.

Check your scores monthly for errors and fraud

Scams and fraud have likely been around since the dawn of time, and unfortunately, they haven’t showed any recent signs of slowing. It’s important to make sure that you account is accurate for a bevy of reasons. Checking your credit scores monthly lets you know if there have been attempts to open credit cards in your name, and helps you keep track of all of the accounts you have open.

In addition to fraudulent activity, sometimes banks, lenders, and credit providers can make errors (they’re mostly human after all). Checking your scores on a timely, consistent basis will help you ensure that everything on your record is accurate.

Don’t get rid of your credit cards

Now that you’re retired, you won’t need as much access to available credit, so you should just cancel a few of your cards, right? WRONG! In fact, this is one of the worst things you can possibly do. That’s because the second largest factor for most scoring models is how long you’ve had your accounts.

So if you cancel a credit card that you’ve had for over 20 years, you might be shocked that your credit score takes a dive. In fact, the impact of keeping your accounts open is two-fold: as stated, credit age matters, but so does credit utilization. This ratio compares how much you owe to how much credit you have available. Therefore, if your available credit decreases, your utilization will increase, leading to a lower credit score. So remember—just because you’re retiring doesn’t mean you should retire your credit accounts.

Get a line of credit for your new career

Remember when we said that managing your credit is the same before and after you retire? That’s the same for both personal and business credit! One of the top rules for business credit is to avoid commingling your accounts, and that’s just as important for retirees.

After retiring from their day jobs, many pensioners turn their attention to opening a business. Let’s say you felt like opening your own Etsy store to sell your crafts online. No matter if your business is a part-time side hustle or a full-time venture, using a credit card dedicated solely to your second act career will save you headaches down the road. Not only can your business take advantage of available rewards, but you’ll make your life much easier come tax season.


This article was originally written on June 20, 2017 and updated on January 27, 2021.

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