Finally, you’re only a few years away from retirement. Trading your suit for some khakis is a great feeling after working for hours, toiling sweat and paying your dues. But all that fun and excitement might go away if you have bad credit. While it may seem that credit score concerns are only for those who are applying mortgages or buying cars, it also has a large impact on your retirement. Even if it might look like you don’t need to have a stellar credit score now, it pays to have good credit. Remember this, you are retiring. Not dying. Here are the top 3 reasons why your bad credit is bad for retirement:
REASON #1: You will save less money for retirement
Bad credit leads to higher interests rates and more expensive debts. If you don’t repair your credit early on, you will incur higher cost for payments on your house or car. That money could have gotten to your 401k or Roth IRA. This would not have been possible if you have repaired your credit early on. Having good credit allows you to save or invest those unnecessary loan payments.
Aside from this, possessing good credit during retirement will allow you to use credit cards for rewards or miles. These benefits can potentially lower your travel costs if you wish to travel around the world post-retirement. At the same time, you will pay lower premiums for your auto and home insurance. Even if both are already paid off, you’ll still need insurance. Bad credit can keep your premiums high if your insurer uses a credit-based insurance score. This is especially troubling as approximately 95 percent of auto insurers and 85 percent of home insurers use credit-based insurance scores in determining premium payments according to the National Association of Insurance Commissionaires.
REASON #2: Limited Moving or Downsizing Options
It’s common for retirees to trade in their cards and downsize their homes to help them ease towards retirement. Scaling back on a few expenditures is normal and doing this most likely requires a credit check. Your loan issuer or landlord will want to ensure that you can afford any purchase you make or you can be trusted to pay back what you will be borrowing. Having bad credit will limit any downsize options you would have preferred to take. If you want to refinance your mortgage to lower interest payments, you may face an uphill battle. Those with higher credit scores have better luck in reducing these charges. It’s best to repair your credit early on to ensure that you’ll not have any difficulty pursuing your retirement options.
REASON #3: Less Money for Emergencies
Even if you feel that you’ll have enough money during retirement to take care of emergencies, you’ll never know what happens. If there’s one thing that is constant in our lives, it’s that anything unexpected will always happen. You may find yourself in need of money for major medical issues, car repair or a new roof and that money in the bank might not be enough. Having available credit at your disposal is crucial especially over the weekend. Bad credit denies you this access and limits the amount of money you can use for emergencies.
Many of the things that you will do post-retirement requires good credit. Without it, financing your dreams and activities can prove difficult with just your retirement income. These three reasons are enough to justify why you need to repair your bad credit. You may be aching to retire but your credit score isn’t. Before retiring, consider paying down your debt and reviewing your credit portfolio. Assess how much access to credit you may potentially need in the future. Plan your retirement spending and allocate your retirement savings early on. The best way to prepare for retirement is to start repairing your credit as early as now. If you want to get a free guide that explains the easy steps on how to repair your bad credit, you may click here. If you don’t know where to start, one easy way of repairing your credit is to work with a credit repair agency. If you want to check out my review of the top rated credit repair agencies, you may refer here. Don’t let your bad credit get in the way of your golden years.