WEST PALM BEACH, FL / ACCESSWIRE / May 5, 2020 / Your golden years should be one of peace and financial reward for all your years of hard labor and smart financial planning. It's a time to sit back and reflect on life and enjoy yourself. However, Marc Linsky says it's not the time to start slacking off on making smart decisions regarding your credit score. Continuing to maintain a good credit score is imperative, even in your retirement age, Marc says. Many people think that they somehow don't need credit anymore, but he says that way of thinking can get you in trouble. Here, Marc Linsky talks about the importance of a good credit score and what it means to you in your retirement years.
A credit score is one of many different types of financial scores credit bureaus and other places keep on their clients. It's an indication of how likely someone is to pay back their credit obligations, Marc Linsky says.
Today, there are hundreds of different credit scores that could have your information in it. However, there is only one to be concerned with, Marc says. This is your FICO (Fair Isaac and Company) score, which is the one the credit bureaus use. "There are actually different variations of the FICO score," he says. "It depends on what they're being used for," he adds. "There is a different scoring system for credit cards, auto lenders, credit cards, and mortgages."
Marc Linsky says the three credit bureaus are Experian, Equifax, and Transunion, and each uses a slightly different FICO scoring method. He says there no need to try to figure out the algorithms of how scoring methods are created since those scoring criteria are confidential. "However," he says, "we do know there are five major considerations that go into making your credit score."
Your payment history accounts for about 35% of your credit score. Paying your bills on time is the best thing you can do for your credit score, Marc says.
The amounts you owe make up about 30% of your score. Marc Linsky adds. He recommends not to owe more than 30% against your open credit. The less you owe, the better,
The length of time you've had your accounts open counts for about 15% of your score. Creditors want to see you've had credit for a long time, so don't close any of your paid off accounts.
The number of new inquiries you've had in the past 2 years is important. Marc Linsky says less is better, so don't apply for any credit you don't really need.
The mix of the different types of credit you have. Lenders like to see a history of a good mix of credit, he says, like credit cards, bank loans, and auto loans.
What is a good range? Scores range from 300-850 with the average score being around 700 according to Experian, Marc Linsky says. Fact is, if you're the type that has maintained a good score for many years, you've probably already developed the habits needed to continue that good score. Just know good credit will still be as relevant in your retirement years as it was in your working years.
For instance, an insurance company probably pulls a credit report before offering you rates on your insurance. Auto purchases or new bank loans are a couple of other instances where the best interest rates are dependent on good scores. Marc Linsky says if your income drops during retirement (as is normal) there's a possibility of not being able to meet your monthly obligations. With proper financial planning, this doesn't have to happen.
"The way to get and maintain a good score is to continue to make your payments on time, don't apply for unnecessary credit, don't close out your accounts once they're paid, and make sure you have a good mix of the types of credit accounts. "Also, be sure you have paid down or paid off your balances each month, he adds.
Marc Linsky says for these reasons, it's important to continue to monitor your credit scores even throughout retirement. You can get a free report each year by requesting it at the credit bureaus. "Remember," he says, "there's no such thing as too good of a score."
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