5 Reasons Seniors Still Need to Maintain Good Credit Scores

1. Renting an Apartment

Perhaps you’re downsizing; a good FICO score will help you qualify for rentals. Many seniors worry about how to rent a property with bad credit, and it’s a legitimate concern.

Most landlords run credit checks before approving rental applications, and some properties maintain strict minimum credit score requirements that can automatically disqualify applicants. Reach out to the HELPS nonprofit law firm, which specializes in assisting senior citizens, retired persons and others dealing with debt collector harassment who want financially related education on their rights.

HELPS advises that you can provide proof of protected income. You’ll need a letter that confirms your income is legally protected from creditors and demonstrates to potential landlords that Social Security or pension monthly income is stable and secure.

Having that documentation helps shift the focus from past credit problems to current financial stability, giving landlords the reassurance they need about your ability to consistently pay rent. If your income is protected, such as from Medicaid waivers, providing documentation to a facility confirming that your funds can’t be garnished may also improve your chances of acceptance, although some facilities don’t take seniors on Medicaid.

Thus, you can increase the odds of renting an apartment or home with a low credit score.

2. Moving to a Senior Living Community

A good credit score is necessary when you move to a senior community. Continuing care retirement communities review credit reports to ensure that all applicants can afford both the initial down payment and ongoing monthly charges. Assisted living facilities view bad credit as a financial risk, because most seniors use private funds to pay full or partial assisted living costs.

If you worry about your less-than-stellar credit rating, don’t give up. You can still try to negotiate reduced fees or flexible payment plans with administrators. Older adults can also try to improve their credit rating by paying bills, reducing outstanding balances and entering into agreements with creditors.

3. Refinancing a Home and Getting a HELOC

Seniors often age in place in their own homes, and the residences have often increased in value over the years. Rest assured that you can still get a home equity loan or home equity line of credit (HELOC) with poor credit. Older adults with credit scores as low as 620 can still qualify for home equity loans, according to Bankrate. Some lenders will even offer HELOCs with a similar credit score. HELOC requirements, however, are almost always higher.

Key strategies to improve your odds of refinancing or getting a HELOC include:

• Adding a co-signer with better credit
• Applying through banks where you already have a relationship
• Writing explanation letters that provide context for credit issues, such as temporary job loss or medical emergencies

To rebuild credit, seniors should focus on:

• Paying all bills on time
• Keeping old credit cards open after paying them off to maintain credit history
• Keeping credit utilization below 30 percent
• Monitoring credit reports for errors and disputing any mistakes

4. Looking for a New Car

Many older adults believe they already bought their major assets by this point and high-end purchases are in the rearview mirror, but they should think again. You may still need a loan for a large purchase like a new car, especially if that 23-year-old Nissan in your driveway is on its last legs.

Lenders tend to reject applications from people on low fixed incomes, so you may have a hard time securing a loan on a new car if, for example, you earn a limited amount of money solely from Social Security.

To buy a new vehicle — whether it’s used or brand-spanking-new — during retirement, rest assured that you can still get a car loan without great credit. But consider that the terms will likely be higher and less advantageous than someone who has better credit. Also be sure to determine whether you have room in your fixed budget to comfortably make car payments.

5. Getting Better Insurance Premiums, Utility Deposits and Cell Phone Plans

Most insurance companies use your credit history to help determine whether to sell you insurance — and how much it will cost — so having good credit matters. The seven states that have strict limitations on the review of credit histories when it comes to auto or homeowners policies are California, Hawaii, Maryland, Massachusetts, Michigan, Oregon and Utah.2

You may not realize it, but utilities and cell phone services often run credit checks to assess their risk. Utility companies frequently demand up-front deposits from customers with poor or no credit history. Cell phone carriers may require security deposits for customers with low credit scores.

According to AARP, many older adults struggle with housing, health care, vehicles and everyday expenses. They’re paying with credit cards more often and therefore carry credit card balances from month to month. About 87 percent of those older adults reported in a recent survey that these types of unexpected costs have contributed to their credit card debt.3

Try to keep up on your bills and credit card payments to maintain a good credit score. You should also do what you can to maintain and improve your score, but you can still live a good lifestyle and tackle your bills while focusing on improving your credit report.

For more information on why older adults may not need to worry so much about their credit scores, check out our interview with Eric Olsen, founder of the HELPS nonprofit law firm.