If you’re retired, own your own home or just feel you have pretty much bought everything you’re ever going to need in life, you may assume that maintaining a good credit score is no longer such a big deal.
What difference does it really make, you ask yourself, if your FICO score is 500 or 750? If you don’t plan on borrowing or using credit again — you’ve unplugged and are officially off the grid — who cares about a few extra points?
That would be foolhardy thinking. No one can predict the future. Circumstances and situations change. By letting your good credit erode, you’re essentially throwing away an important financial lifeline.
Let’s look at 10 reasons why maintaining a good credit score still matters:
Buying a home
Unless you plan on paying all cash for your next home, you’ll need a home loan whose approval and interest rate will largely be based on your credit score. Even if you’re perfectly content with your current living situation, things change. In California alone in 2019, more than 100,000 residents were displaced by wildfires, meaning they had to find other living arrangements.
Taking out a reverse mortgage (for those 62 or older)
Again, maybe you hadn’t planned on taking out a reverse mortgage loan, but now you have a need for tax-free cash. Maybe a business opportunity has come your way. Maybe you want to make some upgrades to your home. And you may have heard that opening a reverse mortgage line of credit is an excellent way to help pay for your long-term care one day.
Another reason that the loan may appeal to you is that you can continue to remain in your home without making future mortgage payments, provided you continue to maintain your home and keep up your property taxes and insurance. Furthermore, you’ve heard that you don’t need a certain FICO score to obtain a reverse mortgage.
While that’s true, your credit will still be evaluated as part of an overall financial assessment your lender will make to determine whether you will be able to meet your future loan obligations. A poor score could jeopardize your loan eligibility.
Maybe you’re ready to move as part your grand downsizing plan. Maybe you want to test the waters of a certain community by renting first. Well, landlords will use your credit score in deciding whether to rent to you. If someone competing for the same place has a higher score, you might be on the outside looking in.
Buying a car
Perhaps your car is running fine at the moment, but cars break down. If you have to buy a new one, plan on spending about $37,185, the estimated average transaction price in 2019 for a light vehicle in the United States, according to Kelly Blue Book.
If you have that kind of money sitting around, good for you, but if you need to finance your purchase, your credit will not only affect whether you qualify for a loan but also the amount and interest rate of the loan. Generally, loan applicants with good credit qualify for larger loan amounts with lower interest rates.
Looking for a job
Maybe you found retirement wasn’t all that it was cracked up to me, leaving you too much time on your hands, and now you want to return to the workforce. Or maybe you found retirement was more expensive than you thought, and a job could help pay a few bills
Today, many employers conduct credit checks as part of the hiring process. If you haven’t demonstrated financial responsibility, a prospective employer might be reluctant to hire you, especially for jobs involving access to money, sensitive customer data or company information.
The process may be unfair and have nothing to do with your ability to do the job, but in the digital age a credit check is just one more means that more and more employers use as part of their hiring decisions.
Starting a business
You can bootstrap some startups with a minimal investment. Or you can access what you need through a crowd sourcing platform like Kickstarter or GoFundMe. But if those aren’t options, and you need a business loan, you’ll need good credit to qualify and keep from paying a through-the-roof interest rate.
Turning the utilities on
Some things we take for granted, like water and electricity. But if after moving, you need these utilities turned on and you have poor credit, expect to pay a large deposit to establish service. Not planning on moving? Each year, roughly 40 million Americans, or about 14 percent of the U.S. population, move at least once. Just saying…
Obtaining a better insurance rate
If you think your auto insurance rates are high now, they could climb even higher if you have a bad credit score. Insurance companies have documented that people with bad credit tend to file more claims, providing these companies with an easy excuse to charge applicants higher insurance premiums.
Getting your credit limit raised
Why not have the largest line of credit you can get. It’s fun to brag about, but even if you never have to use it, it’s nice to know it’s there, just in case. It’s one more financial ace in the hole should you face a real financial emergency.
However, if your credit score has been on the decline, don’t expect your lender to raise your limit, or if they do, you can expect to pay a higher interest for the privilege.
Getting a cell phone
If you have bad credit, cell phone providers may not give you a contract or may extend one only with a large security deposit. The alternative would be a pay-as-you-go plan. By contrast, someone with good credit might receive a discount on their service agreement. Penalty or reward? Which would you prefer?
So even if you think you’ve left the credit game for good, or no longer feel you have to keep up your credit the way you once did, be aware that your decision could prove rash and reckless, if not today, then down the line, when you may least be able to afford a bad credit score.