Quick, what's your credit score?
Let's assume that you’re retired or preparing to retire. Perhaps you have money saved in a 401(k), or in a Roth or outside investments, and Social Security is either coming in, or waiting out there someplace in your future. Maybe for good measure you have some rental property on the side.
By most accounts, life is pretty good.
Over the years, I’ve known a lot of people whose financial situations resembled the description above. But then sometimes, just when it looks like all the ducks are in a row, there's that one bit of oversight that leaves them vulnerable to a setback: lax attention to their credit profile.
For one reason or another, otherwise conscientious people, individuals who are well prepared for retirement, reveal to me that they don't care about their credit score anymore. When I ask them why, they sometimes reply: “What difference does it make?"
My answer is, maybe it won’t make any difference, but it might. Besides, why defile or undermine the legacy of all your hard work? So with that in mind, there are many practical reasons to keep your credit score high, and to consistently monitor your credit report. Here are five:
1. Credit Card Rewards
Two important things about reward cards and retirement: First, if you use a credit card, and pay off the balance (and pay it off on time), you get to use the bank’s money for 30 or even 60 days (depending on when you make purchases), and not your own. Second, racking up those rewards can mean more and even better travel in the form of upgrades and even more trips. Only people with perfect credit get access to those coveted platinum travel rewards credit cards.
2. Refinance your Mortgage
I want you debt free when you retire. But if you can’t retire without a mortgage, just as often, I might advise that you actually refinance your mortgage and extend it out over another 15 or even 30 years. If cash is king, then cash flow is queen. That means refinancing your way into the lowest interest rate loans available. Being nimble and ready to refinance is only possible with great credit.
3. Low Insurance Rates
The higher your credit score the lower your insurance premiums for your house and car. It’s that simple. While it’s true that insurance companies in some states (California, for one) are prohibited from the practice of tying insurance rates to credit scores, I’m assuming they all still find a way to do it. Keep your credit score high so you can keep your insurance premiums low.
4. A New Career
This simply is not your parents’ retirement. More and more retirees are doing anything except actually retire. Instead, they are leaving their careers and, via continuing education or just plain elbow grease, they are starting businesses or new careers, often in fields they’ve always dreamt of. If you’ve never been an entrepreneur, and you’ve spent your career employed by a private company, or a state or local government, the only way you’re going to get a loan to start a business is by having great credit.
5. Don't Get Ripped Off
Your overall financial health should absolutely include monitoring your credit report for identity theft or inaccuracies. A recent study by AARP concluded that it takes months of hard work to clear the record once your identity has been stolen. Monitoring your credit report will help you head theft off at the pass, and that will save you money, time, and a lot of frustration down the line.
I encourage you to not only check your credit score on a regular basis, but take it a step further and change your passwords every few months. Great passwords don't have to be complicated. Earlier this year we published a quick guide to smart passwords that could save you a lot of stress, time, money and aggravation down the line.