How can you manage your credit score once you retire?

Are you on the verge of retirement?

If yes, you might be planning to relax once you hit your golden years. That’s why you might have paid off a mortgage or any other debt obligations so that you won’t have to worry about making debt payments after retirement.

In short, you have been managing your finances in a good manner. And thereby, it might have helped you to build a decent credit score. But as you are going to retire, you may let your credit score droop, thinking that it won’t be required after retirement.

Well, you are not alone. Many retirees have a preconceived notion that credit score is of no use after leaving the workforce. But it’s not true. A credit score is equally important after your retirement too. Your credit score may be checked for various reasons like:

  • After retirement, if you are stuck with mortgage payments, you can refinance it to a lower rate.
  • You may feel like applying for a part-time job after retirement and the employer can check your credit score.
  • In most states, auto insurers check your credit score to decide your premium amount. So, a lower credit score can help you to fetch lower premium amounts for auto insurance.
  • You want to opt for a business loan to open a small business after your retirement. The lenders might deny your credit application if you don’t have an adequate credit score.
  • You want to help your children or grandchildren to take out loans by cosigning for their loans.
  • If you need to take out a personal loan for covering emergency expenses, lenders will check your credit score to determine your creditworthiness.

So, precisely, the credit score plays an important role after your retirement. But how will you manage your credit score once you retire? Let’s find out. 

Always make timely payments

FICO is going to implement a new scoring model (FICO 10 system) by this year. And if you have a history of making late payments, you may notice a decline in your credit score.

According to a FICO report, depending on your credit history and the severity of the late payment, a recent late payment can slash your credit score by up to 180 points.

So, if you have debts to pay off, it’s important to make payments on time. Remember, payment history accounts for 35% of your credit score. Eventually, making timely payments can help you to maintain a good credit score after retirement. 

Get rid of revolving debt before retirement

Usually, retirees have a fixed income, and making hefty debt payments can affect your safe withdrawal rate. And thereby, it can drain your retirement savings. So, it’s better to get rid of revolving debt like credit cards before you retire.

If you pay off your credit card debts, it will lower your credit utilization ratio (the ratio of the amount you owe on your revolving accounts to your credit limit), which accounts for 30% of your credit score. Eventually, you might notice an improvement in your credit score within some time.

However, don’t expect an instant rise in your credit score after paying off your debts. It can take about 30 to 45 days from the day you make payment to notice the update in your credit report.

If you are having problems with paying off revolving debts, you can approach a reputable debt relief company. They can provide help paying off debt and you can lead a debt-free and worry-free life after retirement.

Don’t close your old credit accounts

Let’s say, you have paid off credit cards to enter into a debt-free retirement. And you have decided to close those credit accounts. But that can be a bad move as closing your old credit accounts can hurt your credit score.

The reason being, closing old accounts can lower your credit history which accounts for 15% of your credit score.

So, after paying off debts, it would be better not to close your old credit accounts as it can affect your credit score adversely. But at the same time, make sure to use credit cards wisely after retirement, so that you don’t fall prey to the debt trap.

I would suggest you charge your credit cards for small amounts and pay off your outstanding balance amount in full within the due date to maintain a decent credit score during your golden years. 

Keep a tab on your credit report

According to a report by the Federal Bureau of Investigation (FBI), older adults are vulnerable to falling prey to identity theft. The reason being, they usually have a decent amount of retirement savings along with a fair credit score that allures the scammers. And they become the soft targets of the scammers because of their politeness and trusting people easily.

So, you need to keep a tab on your credit report to find out any fraudulent activities or errors. You can get a free copy of your credit report once a year from each of the three credit bureaus by visiting AnnualCreditReport.com.

If you come across any errors in your credit report, dispute it as soon as possible. Because errors can result in a drop in your credit score.

Besides, if you notice any fraudulent activities, inform it to your bank or credit union at the earliest. Identity thieves can take out new credit cards by using your personal information. And they won’t be repaying any amount and they can max out your credit cards as well. Eventually, it will hurt your payment history and credit utilization ratio, and thereby, your credit score can get reduced by considerable points.

So, you can request your creditors to freeze your accounts so that no new accounts can’t be opened in your name. And thereby, you can protect your score too.

So, the bottom line is, the credit score is equally important after your retirement too. And I hope that the above 4 ways can help you to manage your credit score once you retire. So, don’t worry and be aware. And plan your retirement in a well manner so that you can enjoy your golden years.

Author Bio: Phil Bradford is a financial content writer and an enthusiast. He has expert knowledge about personal finance issues. His passion for helping people who are stuck in financial problems has earned him recognition and honor in the industry. Besides writing, he loves to travel and read books. 

 

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Creative Ways to Shop on a Budget

blue and brown tote bag

A survey by Gallup in 2019 found that only 32% of Americans maintain a household budget. Roughly half of Americans are living paycheck to paycheck, meaning many of us have to get creative in how we shop for things like groceries, clothes, and entertainment. 

Living on a shoestring budget can be stressful, but it is possible with some of these creative tips to shop and make the most of what you have.

Grocery shopping on a budget

Food tends to be one of the biggest spending categories in anyone’s budget. The USDA estimates that Americans spend an average of 6% of their budget on food; 5% of income also goes to dining out. How can you stretch that grocery shopping budget to go even further?

First, time your shopping trip to capitalize on sales and promos:

Wednesdays: The middle of the week is often when grocers release their weekly circular. “You’ll have first dibs on sale items for the week ahead and, if you’re lucky, the store may still honor price reductions on items you forgot to pick up from the previous week’s sale,” says one expert.

Avoid Tuesday and weekends: Weekends tend to be busier as people shop on non-workdays. Tuesdays can also be crowded as other shoppers try to take advantage of last week’s expiring deals, and therefore sale items go quickly. 

Shop late or early: The hour before closing is when some grocers reduce prices on bakery items or produce items that won’t last until the next day. Early in the morning is also when there is less competition for sale items. 

Next, before you head to the store, download an app. Not just any app, but one that gives you discounts: try Food on the Table, an app that lets you type in your food preferences and then generates a list of recipe options based on current promotions at your go-to grocery store. Or, try Ibotta, an app that lets you retroactively apply coupons to items you purchased by scanning your receipt and claiming deals.  Many grocery stores also have apps that deliver exclusive offers and digital coupons. 

Finally, put your dining out budget into your grocery shopping budget. A meal at a fast-food restaurant costs around $8; if you stop eating an $8 lunch every day during the workweek, you can save $40 a week ($160 a month!). 

How to budget for an apartment

Rent is a big budget item for most people, and there are lots of hidden costs in budgeting for an apartment. Whether you’re on the hunt for a new lease or looking to reduce your utility costs and other apartment expenses, there are a few key things to consider when budgeting for your apartment. 

First, if you’re looking to sign a new lease, try to find an apartment that’s close to public transportation. Longer-term leases (a year or more) tend to be cheaper, as the landlord doesn’t have to search for a new tenant or spend on renovations as often. If there are fixes that need to be made, offer to do them yourself in exchange for a discount on the security deposit. 

If you’re in an apartment and hoping to save on utility costs, go beyond basic steps like turning off lights and turning down the heat. Think about turning off the devices that consume energy in a passive way, like your microwave and water heater that you aren’t using constantly. Winterize your apartment to cut your cooling and heating bills (winterize is a bit of a misnomer, as many of these steps can also keep your apartment cool in the summer). And, avoid running your energy-intensive appliances – washing machine, dishwasher, or dryer – during “peak hours”. Electricity companies tend to discount rates during the night when fewer people are using their grid.

Thrifting and other shopping ideas

What about other expenses: clothes, gifts, and entertainment? There are creative ways to shop on a budget for these items too. 

Thrifting is an obvious choice for saving your clothing budget. Many shoppers also turn to fast-casual brands like H&M and Forever 21 – but be aware that those retailers may be more expensive in the long-term. Spending $10 on a t-shirt that lasts fewer than 10 wears is worse than spending $50 on a shirt you’ll own forever. “Unless it’s practically free, you’re better off buying clothing items from good brands with a reputation for well-made items,” wrote The Simple Dollar.

Look to see if clothes are well made by checking the seams and material. Seams on a good quality item will be perfectly straight, with no dangling strings; any patterns should match up well. The material should be higher-quality. Look for natural fibers and blends like wool, and avoid synthetics like polyester. 

For gifts, go for something thoughtful rather than expensive. Find gifts that are unique to the recipient and require time, rather than cash. For instance, give someone the gift of time by babysitting or hiring a house cleaner. Give your family member a recipe book of meals from your childhood. Or, start a new tradition – holiday cookie-baking, for instance – that leads to memories rather than things. 

Shopping on a budget isn’t always easy. Sometimes, what you really need is a little Lift to cover a shortfall or meet a financial emergency. 

This article is contributed by LiftRocket.

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