Credit cardsDoes being retired affect your credit score?
- Being retired doesn’t directly affect your credit score.
- Retirement is not included in your credit report, but other important factors are.
- Your credit score still matters even if you’ve retired.
After years of putting in hard work, you’re ready to retire and settle into a new lifestyle. Whether you’re starting retirement with a good credit score or with one that could use some improvement, retirement does not directly affect your credit score. However, it’s important to maintain good credit throughout your life, even if it may be slightly harder to do so without an income from a job. Let’s dive into this topic in more detail below.
Does retirement get reported to credit bureaus?
No, retirement does not appear on your credit report, and so it is not reported to the three main credit bureaus—Experian™, Equifax® and TransUnion®.
Other important information, however, does appear on your credit report—such as borrowing history, credit card accounts and payment history.
Ways retirement can affect your borrowing potential
When you retire, you will likely be reducing your income. At first, it can be unsettling to no longer receive a paycheck. However, if you've been planning for this moment, you're probably in pretty good shape. Still, there are certain factors to consider.
Because your debt-to-income (DTI) ratio is an important factor lenders consider, you may find that your borrowing power decreases. Usually, with less income coming in, you may increase your DTI, especially if you still have some heavy debts to pay.
According to Experian, you shouldn’t be too concerned if your DTI is below 43%. You‘ll want to shoot for an optimal DTI of about 36%, which some lenders prefer.
How to help maintain a high credit score during retirement
Even if your DTI increases, you can still help keep a high credit score by following a few important steps, including, but not limited to:
- Monitor your credit with online tools like Chase Credit Journey®, where you can check your credit score and receive a personalized action plan provided by Experian to help you improve your score over time.
- Make payments on time. Payment history is a major factor used to calculate your credit score, so continue to make your credit card and loan payments to help solidify a positive payment history.
- Maintain low credit balances, as your credit utilization ratio (how much of your credit limit you use divided by your total credit limit) is another heavily weighted factor used to generate your credit score. If possible, keep your credit utilization to about 30% or less.
- Avoid closing old or little used credit card accounts. This is because your open accounts and their antiquity add to your overall credit mix and credit history, respectively. Consider keeping them active, even if you use them sparingly.
- Look for signs of suspicious activity, such as transactions you didn’t approve on your card statements or accounts you did not apply for on your credit report. If you enroll in a tool like Credit Journey(R), you can also receive free identity monitoring and alerts, which can help you to stay aware of potential data breaches and more.
Does a credit score matter when you’re retired?
Just because you’re retired doesn’t mean you'll never want to make another purchase or take out future loans. If you have a poor credit score when you retire, you could face some consequences, including higher interest rates, difficulty renting an apartment, increased insurance premiums and lowering your borrowing and purchasing power.
It can be easy for your credit score to get lost in the shuffle as your transition into retirement, but this number is still important for your financial well-being.
Whether you’re just starting out on your financial journey or nearing retirement, your credit score is essential when it comes to your financial health. Consistent, healthy habits over time can help you improve and maintain your credit score, even upon retirement. You’ll want to enjoy this well-deserved break from the workforce without the stress that can come with a decreased credit score, so try to remain proactive and vigilant.