Maintaining a good credit profile is important at all stages of life, even for baby boomers who may have paid off their mortgages and don’t anticipate the need for more bigticket loans. But it’s important to remember credit scores are used for more than just borrowing money, and you never know when an opportunity or emergency might pop up where credit is needed.
To be sure, maintaining good credit can benefit everyone from vacation home shoppers to those seeking college tuition loans, and it can help you acquire financing in the event that you’d rather use credit than cash.
What can baby boomers do to maintain good credit scores or improve lower scores?
According to Barrett Burns, president and CEO of VantageScore Solutions, a credit score model developer, it’s a good idea to first check that you even have credit history.
“It’s actually quite common to have little or no credit history, especially if there’s a primary person who handles family financial decisions,” says Burns. “This can leave the other spouse without any credit history. Adding the spouse’s name to the utility bills, mortgage payments and credit card accounts can help them build credit history, which results in a credit score.”
Once a credit history is established, keep these tips in mind:
* Keep credit accounts active. As children leave the household and retirement looms on the horizon, many baby boomers seek to simplify their finances. What you might not realize is that closing old credit accounts with a positive credit history could negatively affect your credit score, especially if this process is done all at once. Keep the older accounts open, and use them for small purchases.
* Encourage financial independence. It’s a common trend for the baby boomer generation to assist their children and grandchildren financially, even helping purchase largeticket items like tuition, homes and vehicles. Cosigning for a loan affects these generous baby boomers’ credit accounts as well as their childrens’, and the behavior of either can affect the credit scores of both. Before cosigning, consider the length of the loan’s terms and have confidence that payment obligations will always be met.
* Know how to protect your score, even in disasters. Natural disasters can happen at any time, and in any location. Baby boomers who are affected by a natural disaster can ask lenders to flag their accounts while they get their lives sorted out after the disaster. When lenders flag an account in this manner, the account is no longer used when your credit score is calculated. This can have both positive and negative effects. If you flag an account that has always been paid on time and managed wisely, then that account is likely normally having a positive impact to your score. When it’s flagged for a natural disaster then you lose that positive impact, and potentially risk lowering your credit score while it remains flagged. On the other hand, if the account has blemishes, those negative elements will be ignored while the account is flagged, temporarily boosting your score. Unlike other credit scoring models, the VantageScore model will include the flagged accounts if doing so will have a positive influence on the consumer’s score. This way a consumer can continue to benefit from the positive impact that account might provide for them.
* Review your credit files and your score. By checking to make sure your credit files are accurate and knowing your credit scores, you can make changes to your credit habits, improve your scores, or continue down the path of being a good credit manager. Every boomer should get a copy of his or her credit report annually from each of the national credit reporting companies (Equifax, Experian and TransUnion) at www.annualcreditreport.com and review them to be sure they are complete and accurate.
To test your knowledge about credit scores and find ways to make improvements in your credit history, visit www.CreditScoreQuiz.org, which was created by VantageScore Solutions along with its partner, Consumer Federation of America. The online quiz is also available in Spanish at www.creditscorequiz.org/Espanol.
You never know when you may need to have your credit score pulled so it’s a good idea to continue practicing good credit management habits even if you own your home and your car outright and don’t anticipate applying for a loan at any time in the future. For more information about credit scores, visit www.yourVantageScore.com.