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Do retirees need to maintain a strong credit score?

Many Britons assume that their borrowing days are behind them by the time they reach retirement as they shift their focus towards wealth preservation as opposed to credit concerns. As a result, credit scores are no longer considered to be important, ultimately causing the score to fall.

However, credit scores can continue to be a useful tool for individuals, even when they have retired…

Why are credit scores still important?

Credit scores are an important tool to help individuals access to finance and achieve their financial ambitions. And it is no different for retirees. Indeed, by accessing various sources of finance, retirees are able to maintain or improve their lifestyle in retirement.

For example, if someone wants to move house – to downsize their property or move to a more affordable area – a mortgage will likely be required. Mortgage applications are heavily impacted by an individual’s credit score; they determine whether their application is approved and the interest rates the individual must pay. Therefore, it is advisable for retirees to maintain a stronger credit score to secure the best mortgage deal possible.

Credit scores will also be useful for retirees looking to secure lower monthly bills. Indeed, refinancing one’s mortgage or loan to achieve lower interest rates and, consequently, monthly bills. However, a strong credit score will be required to achieve this, as it proves to lenders that the borrower in question is reliable and worthy of a lower interest rate.

Credit scores can influence a person’s access to various other products, ranging from car insurance to mobile phone contracts – and unsurprisingly, those with the best scores are more likely to achieve the best deals.

The question, therefore, is how can retirees maintain strong credit scores?

Maintaining a strong score

First and foremost, it is advisable for retirees to check their current credit score, understand their current status, and determine whether action is needed to improve it. This is usually accessible via the UK’s three main credit agencies: Experian, Equifax and TransUnion. Alternatively, a person’s complete credit report can be found on free-to-use platforms such as ClearScore or Credit Karma.

Once a clear view of one’s credit score has been established, retirees can take steps to build up and maintain a strong score.

Ensuring debt and bill repayments, such as for one’s mortgage or credit cards, are paid on time is a strong start. This demonstrates that the individual is reliable with repayments and will consequently result in a stronger credit score.

Keeping balances on existing credit cards below their limit will also help to maintain a strong score. Experts tend to recommend a utilisation rate of 30% or less; however, provided that the debt is repaid on time, there will be flexibility in their figure.

Even small actions such as remaining on the voting register can help retirees maintain a strong credit score, as many lenders use the electoral roll to verify the identity of a credit applicant.

That said, maintaining a strong credit score may seem like an overwhelming prospect for some people, and many might not know where to start or how it might impact their retirement outcome. As such, retirees would be wise to seek independent financial advice before taking any decisive action. Indeed, our team of advisers at My Pension Expert will assess an individual’s financial situation, as well as their future goals, and help them decide on a financial solution that will best suit their needs.

Whilst many people assume they won’t need to access finance throughout their retirement years, situations can change at the drop of a hat. Accordingly, having a strong credit score in one’s back pocket can be extremely useful to help retirees access finances if required.

As always, however, seeking financial advice before taking definitive action is vital; this will ensure that retirees are able to strengthen their financial position without damaging their current or future prospects.