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How Credit Score Matters after Retirement

Living in India is difficult and so is retirement. Therefore, it is better to plan for your retirement at early age for a happily ever after. Just think about the beautiful benefits of a successful retirement plan. You do not need to worry about managing the housing loan or your children’s education, you're free to do whatever you want without any job-related stress. In case there comes a situation where an extra income is required, one can always borrow from a bank. And when you need to borrow money from a bank or a credit institution, a good CIBIL score is an absolute must. Therefore, it is always a good option to have a well maintained CIBIL score during your retirement years as well. It is often easy to maintain a good CIBIL score post-retirement. There is little or no stress as you just need to simply pay your credit card bills on time.

Reasons to Maintain High CIBIL Score during Retirement

  • Insurance Cost - When you have successfully maintained a good or high credit score during your employment years, you will be looked upon as a more responsible person when it comes to handling risk. This is looked upon as a positive condition by the bank when disbursing a loan, as credit scores are used to determine your loan amounts and interest rate.
  • Refinance Collaterals - A good credit score will entitle you to easily refinance collateral investments such as a mortgage. A mortgage comes with a cash-out reference just in case you require liquid funds and you’ve run out of money.
  • Change in Residence Location - Many people often prefer to retire in their hometown or someplace peaceful, away from the hustle and bustle of city life. Thus, in order to obtain a home loan for purchasing a nice retirement home, you need to have a good credit score to finance anything extra such a moving to a new location.
  • Credit Cards - Another good option is to apply for a reward based credit card which comes with many cashback and reward points when you make purchases for general shopping and household needs. If you want to avail a good credit card, maintain a good credit score. Also, if you make your credit card payments in full every month, you will not be subjected to any interest rate charges.
  • Avail Loans - Let us assume that you require some money in order to pay for an accident, and if you don’t have an emergency fund, you will have to curtail your savings. But if you have a good credit score, you can easily avail an extended line of credit from your credit card. Many credit cards allow you to take a loan up to 90% of your credit limit.
  • Emergency Expenses - Expenses which occur suddenly and can cause a dent in your wallet. Hence, you will have no option but to borrow money. Ensuring that your credit score is high gives you the option to avail this credit in times of an emergency.
  • Retired Life - Retirement may not necessarily be a boring phase of your life. With adequate money, one can pursue the careers and hobbies they could not during their time of employment. When you have an extended line of credit, you can meet all of these expenses without having to compromise on your savings. When you have a good credit score, you will know that you can easily avail credit to meet the costs attached with your new hobby.

Ways to ensure CIBIL Score stays high during Retirement

The only way to ensure that your CIBIL score stays high during retirement is via effective maintenance of your debts and liabilities. A credit score is directly affected by the two factors mentioned above. It is better to clear all your debts and liabilities on time and if you don't, then you will have to take money out of your retirement corpus which will again affect your credit score. Another advantage for retirees is that your personal age does not impact the credit score. A credit score can be repaired over a period of six to twelve months, which means that if you’ve managed to pay your credit card debt, at any age, you can almost certainly expect your credit scores to improve.

Mistakes to avoid during Retirement

  • Credit Scores Matter - As we have mentioned above, it is very important to maintain good credit scores even after retirement. When you retire, there are bound to be expenses over and above your monthly pension. From mortgage to insurance premium rates, credit cards to auto/home loan, all are heavily dependent on a good credit score.
  • Credit Card Accounts - It is always advisable to ensure that your credit card accounts are active at any given stage of life or age. The reason is that when you close unused credit card accounts which were active at some point, your credit card debt-to-limit ratio increases and credit score will immediately plummet.
  • Monitor your Credit Reports - It is essential to monitor and update your credit information report regularly in order to protect yourself from credit errors and identity theft during retirement. Errors in your credit report can have a negative impact on your credit score. Therefore, it is good to monitor your credit report on a quarterly basis.

FAQs on How Credit Score Matters after Retirement

How many times a year should I check my credit report?

It is a good habit to monitor and update your credit information report every quarter in a financial year in order to protect yourself from credit errors and identity theft.

Does a good credit score affect insurance premium rate?

Yes, a good credit score can offer you an insurance premium at a suitable rate. Also, you can also bargain for ideal terms and conditions with a high credit score.

What is a loan account?

A loan account is an account which is required to repay the outstanding amount borrowed by an individual. When you apply for a loan from a bank, post approval, the bank will open a loan account in your name which has all the details to the EMI transactions, due date, amount, outstanding, credit balance, rate of interest etc.