How Does Your Credit Score Impact Your Retirement?
Paragon is pleased to include a guest blog from Joe Camacho at the Phenix Group in Fort Worth, TX. Joe has 12 years of experience in Consumer Services, Credit Education, & Credit restoration.
People tend to think of credit in terms of the here and now but the truth is that the impact of your credit score has effects that extend into your golden years. The fact is that your credit score will affect when you retire and how you will retire. Don’t believe it?
Here are just a few of the ways that your credit score can impact your retirement:
Interest Rates
According to a Dallas credit repair company, Your credit score is not just used to determine whether or not you will be able to get that shiny platinum card with the high credit limit you have been eyeing. Banks and lenders also use your credit score to surmise what interest rate they can safely offer you.
If you have bad credit, they see it is a higher risk loan and seek to protect their investment by charging you a higher rate of interest. If your credit is good though, they will be more likely to offer you a low-interest rate as you have proved yourself as a responsible borrower.
So what does that have to do with your retirement plans?
Well if you have a high-interest rate you won’t be able to save as much money for your retirement. Mortgages will typically take longer to pay off if your interest rate is high. That could mean having to hold off on retiring longer than you anticipated. The same goes for auto loans. Taking out an auto loan for a new car with a high-interest rate can eat into your retirement savings which can mean retiring with a paltrier nest egg than you had hoped.
Insurance Costs
These days, your credit score is used to help make decisions in almost every aspect of your life. A prime example of this is insurance premiums. Believe it or not insurance companies are starting to look at an applicant’s credit scores when determining premium prices. This is due to an apparent correlation between clients with low credit scores and costly insurance claims.
Insurance companies will charge higher premiums for homeowners insurance if you have bad credit. Again, this could affect your nest egg and make it difficult to retire early or on time.
Landing a Job
Another example of credit affecting numerous areas of your life: employers will often check your credit score before making a hiring decision. For better or worse, people with good credit are perceived to be more reliable. Not getting a high-paying job because of poor credit could throw a massive monkey wrench into your retirement plans.
When you Retire
Retiring in and of itself will not harm your credit score but it will affect your eligibility for loans. Since your income will likely decline when you retire, banks and lenders will be reluctant to dole out large loans or lines of credit.
Credit cards can be useful in retirement by helping to maintain the user’s credit score and accruing cash-
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