There are three certainties in life: death, taxes and credit scores remaining relevant into retirement.
While credit scores and history can seem less important if a retiree thinks their borrowing days are over, ignoring credit reports in retirement can be costly, said Natalia Bassova, broker and owner at Resort Real Estate, Inc.
“Uncontrolled mistakes [on a credit report] are the most expensive in retirement as you are living on fixed income and every surprise costs more,” Bassova told The Independent in an email. “It only requires fifteen minutes to pull your free annual report, and it is the least expensive insurance a retiree has against the expenses that they do not anticipate.”
The Independent spoke with financial experts to break down why getting free credit reports still matters even after consumers transition into their golden years.
Prepare for life changes
Creditworthiness remains important in the later stages of life because financial surprises and life changes don’t stop the moment an individual stops working, said Adem Selita, co-founder of The Debt Relief Company.
“Ideally, in your retirement years, you are [past] the point of needing credit for major purchases, but major life changes can occur at any point in life and can potentially throw a wrench in your plans,” Selita told The Independent via email.
Ignoring items on a credit report could lead to denied financing for unexpected expenses, such as medical bills or car repairs. Strong credit is also important because retired borrowers may face more scrutiny than the average person, according to Roberts.
“When you retire, you are no longer receiving a consistent monthly income, which is what most lenders use to assess your risk level and ability to make repayments,” Roberts said. “Therefore, if you do not take care of your credit after you retire, your lender may give less consideration to approving you for loans or other forms of financing.”
Unknown credit issues can also hinder a retiree from co-signing for a grandchild, getting an apartment lease, moving into a senior community or setting up essential utilities.
Potentially save money
Tracking a credit report can help seniors save money by identifying and resolving credit issues and errors they may not have otherwise known about.
That’s a scenario that Bassova saw play out with one of her clients, who was unaware of an account dragging down their score.
“A retired Naples client could not understand why her homeowners insurance premium increased by nearly 600 dollars last year,” she said. “No claims made, no amendments to the property. When we checked into it, a medical collections account of less than $800 had gone on her credit report due to a billing dispute she had no idea about.”
Since Florida is one of many states that use credit-based insurance scores, premium hikes can occur even after a single recent incident,.
Ignoring a credit report can also lead to higher interest rates on loans and credit cards, Bassova added.
She explained that this happened to reverse mortgage borrowers she knew who learned that their credit report incorrectly listed a paid-off account as having a balance.
“The lender put a hold on the whole application after six weeks as they argued out the application at the bureau,” she said. “The interest rates changed within that window, and they were left with worse terms than they initially qualified.”
Detect signs of fraud
Older Americans are common targets for financial fraud and identity theft that lure them into bigger losses than younger victims, according to the Federal Trade Commission. Checking a credit report regularly helps spot and address these issues, said David Chami, managing partner at Consumer Justice Law Firm.
“Your credit report will show early red flags of potential identity theft activity – such as unauthorized credit inquiries – and serve as the ultimate catalog of the credit and financial information in your name,” Chami told The Independent in an email. “So, any unauthorized activity that goes unnoticed by you will start to hit your credit report as inaccurate personal details, unrecognized accounts/loans, and other data.”
If you suspect fraud, act quickly. Report the fraud to the involved creditors, credit bureaus (including freezing credit files and filing disputes), and law enforcement, the Consumer Financial Protection Bureau, a federal consumer advocacy office, recommends. IdentityTheft.gov provides a helpful checklist consumers can use when combatting fraudulent transactions.
Check your financial standing
A credit report is a great tool for better understanding one’s retirement finances, said Mike Roberts, co-founder and president of City Creek Mortgage.
Reports typically list every borrowing account in your name, along with the monthly payment amount and payment history.
“You are essentially getting free access to a snapshot of your current financial status,” Roberts told The Independent via email. “It allows you to see what you owe, who you owe, and where you stand financially. This is especially important during retirement when you have fewer income sources to rely on.”
Use the data from the reports to set a realistic retirement budget, strategize withdrawals, and create debt repayment plans that reduce interest costs. Also, address any account concerns, such as late payments, high revolving balances or incorrect account details.
How to get free credit reports
Retirees can visit AnnualCreditReport.com for free credit reports. Enrollees typically need to provide basic personal details, confirm their identity and get their free credit reports from credit bureaus Experian, Equifax and TransUnion. Check at least quarterly or annually, Chami suggested, though consumers can request free reports as often as weekly.
While credit reports contain extensive information about accounts, payment history, and credit activities, Roberts suggested focusing on a few key basics.
“Are my payments being reported to reporting agencies accurately?” he said. “When do I expect all of my debts to be paid off? These are the items lenders look at, so it makes sense to review them yourself as well.”
In addition to spotting signs of fraud, Selita also advised looking for changes that limit your ability to use existing credit lines.
“In some scenarios, credit card companies could lower your credit limit due to the drop in your income and due to the fact your now on a fixed income”, he said.
Credit reports won’t show a borrower’s credit score. For that, consumers can typically get their score directly from the credit bureaus or through third-party credit monitoring service.
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