Finder money expert Bessie Hassan explains how your credit score affects your life during retirement and why it’s important to care about this money issue.
You may have reached a point in your life where you’re a little blasé about your financial behaviour and your credit score. But there are actually plenty of reasons why you should maintain a clean credit score throughout your twilight years.
Whether you need to provide financial support to your kids, you want to expand your investment portfolio or you need to take out a loan to cover your travel costs, a good credit score will serve you well during your retirement.
Wondering what a credit score is? Don’t worry, you’re not alone. It’s a number ranging from 0 to 1,200 that banks use to determine your risk as a borrower. The higher your score, the better. Your score is determined by your financial behaviour, so the better your financial history, the higher your score should be. You can look up your credit score online for free here and find out where you stand.
Here are a few reasons why you should care about your score.
1. To support your kids (or grandkids)
With inflated property prices in many of Australia’s capital cities, it’s become increasingly difficult for young people to get a foothold on the property ladder. This is where the “bank of mum and dad” comes in.
If you want to go guarantor on a loan for your child, the bank will review your financial situation to see if you’re in a sound position to assume responsibility for the mortgage should your child default on their repayments.
Having a good credit score could make or break your ability to help your kids secure their family home.
2. To diversify your investment portfolio
If you’re looking to diversify (or expand) your investment portfolio, it’s crucial that you have a good credit score. If you want to take out an investment loan, for instance, a lender will use your score as an indication of whether or not you’re capable of servicing the loan.
Remember, as you get older, banks view you as a greater liability given your lack of employment and stable income, so a good score may help you secure the loan or investment you need.
3. To get discounts on financial products
If you’re a self-funded retiree or you’re relying on pension benefits, you may still want to sign up for a credit card for any unexpected medical costs that may arise.
Not only does a good credit score mean that you have a better shot of being approved for finance, but it also means that you could enjoy discounted rates on financial products like credit cards or loans.
For example, if you need to take out a line of credit or a personal loan to cover a home renovation project, you may be given a cheaper interest rate if you have a higher credit score (say, higher than 700).
Your credit score is important during every life stage, but it has particular importance as you get older. Whether it’s being there for your loved ones, being in a sound position to diversify your portfolio, being approved for finance or accessing cheaper interest rates, there are many reasons why you should ensure that your credit score is in good shape. A good credit score will give you and your family the financial independence to enjoy life to its fullest.